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Change in SRAS

Definition

A change in SRAS refers to a shift or movement of the short-run aggregate supply curve caused by factors such as changes in input prices, technology advancements, government regulations, or expectations about future economic conditions.

Analogy

Think of a change in SRAS as a weather forecast affecting beach supplies. If there's good weather predicted for the weekend, beachgoers will increase their demand for beach-related items like umbrellas and sunscreen. This sudden change in demand requires suppliers to increase their production capacity and adjust pricing accordingly.

Related terms

Cost-push Inflation: Cost-push inflation occurs when rising production costs lead to higher prices throughout the economy due to decreased SRAS.

Input Prices: Input prices refer to the cost of resources used during production, including wages, raw materials, energy costs, etc., which can influence SRAS movements.

Business Taxes and Regulations: Changes in business taxes or regulations imposed by governments can impact firms' costs of production and ultimately affect SRAS levels.