Short and Long run supply

Short and Long run supply - Short and Long run supply:...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Short and Long run supply: Earlier we have seen that aggregate supply curve has two phases. Initially on the flatter portion more and more output can be produced with a small rise in the price level. This is possible so long as some resources are unemployed or underemployed . But once the economy reaches a point close to full employment of resources, the supply curve becomes very steep and vertical. These two phases can be associated with short and long run transitions in the aggregate supply conditions as well. The flatter initial phase is a short-term phenomenon whereas steeper vertical portion is experienced in the long run. The distinction is based on the fact that progressive fuller utilization of available resources is a time-consuming activity. Besides there is another contributory factor which causes lapse of time between the two phases. Several resource agents or factors of production are employed on the basis of contracted remuneration. Rate of wages, rent of land and building premises, interest on the
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

Page1 / 2

Short and Long run supply - Short and Long run supply:...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online