SRAS

Question 1

Why does AS slope up

Answer 1

Higher price encourages firms to produce as more profit opportunities

Question 2

How does SRAS differ from LRAS

Answer 2

In SR, one FOP or more is fixed

Question 3

Law of diminishing marginal return

Answer 3

Employing additional labour reduces productivity, so cost per unit is more expensive, so prices must increase

Question 4

What factors shift SRAS

Answer 4

Change in COP

Question 5

What are the assumptions behind SRAS analysis

Answer 5

Fixed productivity, fixed input prices are constant, fixed tech