Write explanatory answer:
What is aggregate supply? Explain the determinants of aggregate supply.
What is aggregate supply? Explain the determinants of aggregate supply.
Aggregate supply
is the total supply of goods and services available to a particular market from
producers.
The main
determinants of aggregate supply are:
1.Wages:
This is the price of labor, which works through the resource price determinant.
It is the key determinant underlying the self-correction mechanism of the
aggregate market.
2.Technology:
Improvements in production techniques, often embodied in product inventions and
innovations, is a prime example of a resource quality determinant.
3.Energy
Prices: These are the prices of key energy inputs, especially petroleum, that
are essential to any modern industrialized economy. Like wages, energy prices
also work through the resource price determinant
4.Capital
Stock: This is the total quantity of capital used by the economy for
production. It is a prime example of a resource quantity determinant and
affects both the short-run and long-run aggregate supply.
Other determinants of aggregate supply include education,
population growth, labor-force participation, resource exploration, and
assorted material input prices.
Aggregate supply is the total supply of goods and services available to a particular market from producers.
The main determinants of aggregate supply are:
1.Wages: This is the price of labor, which works through the resource price determinant. It is the key determinant underlying the self-correction mechanism of the aggregate market.
2.Technology: Improvements in production techniques, often embodied in product inventions and innovations, is a prime example of a resource quality determinant.
3.Energy Prices: These are the prices of key energy inputs, especially petroleum, that are essential to any modern industrialized economy. Like wages, energy prices also work through the resource price determinant
4.Capital Stock: This is the total quantity of capital used by the economy for production. It is a prime example of a resource quantity determinant and affects both the short-run and long-run aggregate supply.
Other determinants of aggregate supply include education, population growth, labor-force participation, resource exploration, and assorted material input prices.
