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How to explain Run Aggregate Supply Curve?

帮考网校2020-10-15 16:40:57
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The run aggregate supply curve represents the total amount of goods and services that firms are willing and able to produce and supply at different price levels in the long run. It is a graphical representation of the relationship between the price level and the quantity of output that firms are willing to produce, assuming that all input prices are flexible and can adjust to changes in the price level.

The run aggregate supply curve is upward sloping, indicating that as the price level increases, firms are willing to produce more output. This is because higher prices increase the profitability of production, which encourages firms to increase their output. In the long run, however, all input prices are assumed to be flexible and can adjust to changes in the price level, so firms cannot sustain higher profits indefinitely. As input prices adjust, firms' production costs increase, and the run aggregate supply curve becomes steeper.

Overall, the run aggregate supply curve reflects the long-run potential of the economy to produce goods and services, given the available resources and technology. It is influenced by factors such as changes in technology, changes in the size of the labor force, and changes in the availability of capital and natural resources.
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