Lec- Week 6

23 Pages

Economics for Management Studies
Course Code
Iris Au

This preview shows pages 1,2,3,4. Sign up to view the full 23 pages of the document.
1 ECMA06 The AS-AD Model (continued) The AS-AD Model (continued) Outline The derivation of the aggregate supply (AS) curve. The adjustment mechanism of the AS-AD model. Consider the effect of a disturbance in the AS-AD model and its implications on government policy. Aggregate Demand - Review Recap, what do we learn about the AD? The AD curve indicates the equilibrium level of output on the demand side. The AD curve shows the combinations of Y and P such that Y = AE = C + I + G + X IM. Any factor that affects autonomous expenditure other than Y and P will shift the AD curve. www.notesolution.com2 Derivation of the Aggregate Supply (AS) To complete the model, we need to derive the aggregate supply curve. The aggregate supply (AS) curve represents the amount of output that firms in the economy are willing to produce at each price level. Question: What we learned about marginal cost (MC) in micro suggests that AS should be upward sloping. Does it hold true for the economy as a whole? Answer: Probably not! Once again we are looking at the entire economy not just one industry, the big picture matters! The level of unemployment matters The level of unemployment affects the slope of AS curve. www.notesolution.com
More Less
Unlock Document

Only pages 1,2,3,4 are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.