MGEA06H3 Lecture Notes - Lecture 6: Price Level, Aggregate Supply, Macroeconomics

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10 Feb 2016
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Aggregate Supply (AS)
The aggregate supply (AS) curve represents the quantity of output that
producers are willing to supply at each aggregate price level.
There are two types of aggregate supply – one for the short run and one for
the long run.
The Short-Run Aggregate Supply Curve (The SRAS Curve)
In macroeconomics, prices and wages are sticky in the short run. In
particular, they are sticky downward.
Assumption: Holding all else constant, producers are willing to supply more
goods and services in the short run when the aggregate price increases.
ÞThe short-run aggregate supply (SRAS) curve is upward sloping.
In generic form:
SRAS: P =
(a+bY )
(
W
´
W
)
,
where a = coefficient, b > 0,
´
W
> 0,W = wages
P SRAS
Y
MGEA06 – Week 6 Iris Au 1
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