Edexcel A-Level Economics Notes | 2.3

  • Aggregate supply is the volume of goods and services produced in the economy at each price level.
  • In the short-run, at least one factor of production is fixed.
  • In the long-run, all factors are variable.
  • SRAS (short-run aggregate supply) shifts if costs of productions change. This includes raw material prices, exchange rate, tax rates, wage rates, and productivity.
  • LRAS (long-run aggregate supply) is the maximum productive potential of an economy independent of price, and is determined by all factors of production and quality. Its factors incldue technology, relative productivity, education and skills, government regulations, demographic changes and migration, and competition policy.