SRAS
Short-run aggregate supply (SRAS) shows the positive relationship between the price level and the quantity of output firms supply. The SRAS curve slopes upward because higher prices increase profit margins before costs fully adjust. The short run is the period when some costs (particularly wages) are sticky and do not adjust immediately.
Real World
During the post-COVID recovery in 2021, UK firms increased output as demand surged, but wages had not yet caught up with rising prices — profit margins widened temporarily, illustrating the sticky-wage logic behind an upward-sloping SRAS.
Exam Focus
Explain why SRAS slopes upward using sticky wages and profit margins, not just 'firms produce more when prices rise.'
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