Changes in costs, such as money wage rates, raw material prices, business taxation and productivity, will shift the short-run AS curve
When firms' costs rise, they supply less at every price level. This shifts the short-run aggregate supply (SRAS) curve to the left.
Real World
The UK's National Living Wage increase to £11.44 in April 2024 raised labour costs for retailers like Next and Tesco, shifting SRAS leftward and creating cost-push inflationary pressure across the sector.
Exam Focus
For each cost factor, always state the direction of the SRAS shift and explain the mechanism — rising costs → lower profit margins → reduced supply at every price level.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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