Aggregate Supply Curve AS is a graph or illustration that depicts the number of

Aggregate supply curve as is a graph or illustration

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Aggregate Supply Curve (AS) – is a graph or illustration that depicts the number of goods that will sell at a given priceAS curve is an indication of amounts or goods or services that sellers are willing to sell based on opportunity cost Economic Efficiency –Full Employment and Full Production must be achieved to be in the state of economic efficiencyoccurs when goods and services are made and consumed at the best levels for the society. Nothing more can be achieved with the resources availableImportant social goal, leads to economic growth and stabilityProduction proceeds at the lowest possible per-unit costoHowever, because goods and services are scarce, full employment and full production economy cannot have an unlimited output of goods and services. Choices must be madePrinciple of Efficiency – efficiency leads to economic prosperity for all, core economic principleSocially Optimal Quantity - the amount of goods that result in the greatest economic surplus Menu Costs – cost associated with changing pricesCost such as those associated with changing signs and menusMenu costs help stabilize pricesWealth Effect – increase in spending due to perceived increase in wealthPeople spend more when they are RICHER or if they perceive themselves as richerShort-Run Equilibrium Output – the level of output where output equals planned aggregate expenditurePrevails when prices are predeterminedShort-Run Equilibrium - When the inflation rate is equal to past expectations and pricing and output is equal to the level that is consistent to the inflation rate If there is a gap in the output, the inflation rate will adjust to fill the gapAutonomous Expenditure – portion of planned aggregate expenditure that is not based on outputDoes not change with output levelsAutonomous expenditure and induced expenditure combine to equal the aggregate expenditureInertia – slow change in inflation from year to year in industrialized nations Long-Run Aggregate Supply Line (LRAS) – a vertical line on the aggregate-supply-aggregate demand diagram that represents an economy’s potential outputShort-Run Aggregate Supply Line (SRAS) – a horizontal line on the aggregate-supply-aggregate demand diagram that represents inflation Inflation that is a result of consumer expectation and historyOn the demand curve, the PRICE of the item is placed on the vertical axis of the graphAs the price of an item increases, demand for the item decreases, resulting in less sold (output)
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On the demand curve, the QUANTITY of output for the item is placed on the horizontal axis of the graphThe difference between a change in demand and a change in the quantity demanded is that a change in the quantity demanded is directly related to a change in the products priceRight Shift – in the demand curve indicates that demand has increasedMarket Equilibrium – occurs when the supply curve and the demand curve intersect
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