MGEA06H3 Lecture Notes - Lecture 6: Shortage, Aggregate Supply, Marginal Cost

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA06H3
• Professor: Iris Au

Document Summary

The derivation of the aggregate supply (as) curve. N consider the effect of a disturbance in the as-ad model and its implications on government policy. N we have already derived the ad curve. We need to derive the aggregate supply curve to complete the model. N recap, what do we learn about the ad: the ad curve indicates the equilibrium level of output on the demand side. In other words, the ad curve indicates, at each different price level, the level of output that generates just enough ae (c + i. + g + x im) so that all the output gets purchased (remember we derived the ad curve by setting y = ae). N but, we need to consider what firms are willing to produce: what we have not captured is whether, at that price level, firms will indeed be willing to produce that level of output.