The price level and production costs are the main determinants of the short-run AS
Short-run aggregate supply (SRAS) tells us how much output all firms produce at different price levels. Higher prices encourage more output; higher production costs discourage it.
Real World
When global oil prices spiked in 2021–22, UK energy costs for manufacturers surged, raising production costs and shifting SRAS leftward — contributing to double-digit inflation as firms passed costs on and output fell.
Exam Focus
Distinguish clearly between a movement along SRAS (caused by price level changes) and a shift of SRAS (caused by cost changes) — confusing the two is a common exam error.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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