Intro to Aggregate Supply content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class. Subtopics Characteristics of AS

1. Intro to
Aggregate
Supply
Lower 6th Macro
Aggregate Supply

2. Characteristics
of Aggregate
Supply
Intro to Aggregate Supply
Mr O’Grady

3. Characteristics of AS
Definition: The total level of real output of all domestic goods and services over a
given period of time
An important distinction: In economics, the distinction between short run and the
long run is not defined by a given amount of time, but rather by the flexibility of
factors of production (specifically capital and labour).
Short run: At least one factor of production is fixed (usually capital), meaning that we can’t
easily increase or decrease the amount of that specific input in our economy or move it
between different uses
Long run: All factors of production are fully flexible
Two main models of aggregate supply: Based on different assumptions of
flexibility in the labour market
Classical: Assumes a fully flexible labour market. Unemployment can persist in the short-run,
but in the long run wages and prices are flexible ensuring that the economy operates at the
full capacity
Keynesian: Assumes wages and factor input prices are ‘sticky downwards’. Unemployment
may persist even in the long run

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