# ### agggregate supply function illustration Definition: Aggregate supply (AS) is the total real output of goods and services, including consumer goods and capital goods, that firms produce and supply at a , Aggregate Supply & Demand Revised: January 9, 2012 , Figure 1 is an example The aggregate supply curve (AS) represents combinations of output (real GDP, which we denote by Y) and the price level (an , the production function (1): an increase in productivity A raises output Y For example, take an imaginary economy where the amount of one good supplied is the price, minus 1/5 the price of related goods, plus the number of suppliers In this case, the supply function would be "Qs = P - 1/5Prg-S" May 02, 2014· In this video I explain the most important graph in most introductory macroeconomics courses- the aggregate demand model In this video I cover aggregate demand (AD), aggregate supply (AS), and . Supply schedule A supply schedule is a table which shows how much one or more firms will be willing to supply at particular prices under the existing circumstanc Some of the more important factors affecting supply are the good's own price, the prices of related goods, production costs, technology and expectations of sellers Aggregate Supply & Demand Lecture Slides are screen-captured images of important points in the lecture Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture 1 Econ 302 Intermediate Macroeconomics Chul-Woo Kwon Ch5 Aggregate Supply and Demand I Introduction We studied an economy when the goods and services markets are , aggregate labor supply, , will, for example, be the case if preferences are convex, which means a concave utility , For other economies this will not be the case, and the utility function of the aggregate will be very dif-ferent from that of the individuals being aggregated Indeed, if the aggregate labor . Where aggregate expenditures (consumption function) crosses the 45 o line indicates the equilibrium point where desired aggregate expenditures = total income Shifts in Consumption Function Changes in factors that affect consumption other than income (eg, a wave of pessimism that reduces the desire of people to spend money on consumption . The aggregate expenditure at each level of income is the total planned spending, or, according to the chapter's model, the sum of consumption, planned investment spending, government purchases, and net , qD = f (price, income, prices of related goods, tastes, expectations) It says that the quantity demanded of a product is a function of five factors: price, income of the buyer, the price of related goods, the tastes of the consumer, and any expectation the consumer has of future supply, prices . What are the main causes of shifts in aggregate supply? The main cause of a shift in the aggregate supply curve is a change in business costs – for example: 1Changes in unit labour costs - ie labour costs per unit of output 2 AGGREGATE DEMAND AND SUPPLY AGGREGATE DEMAND:-Aggregate demand is the amount which will be spent at different values of the price level It is composed of consumption (C), investment (I), government spending (6) and net exports (X—M) Briefly explain the reason for the near-horizontal shape of the aggregate supply curve, or short run aggregate supply curve, on its far left Briefly explain the reason for the near-vertical shape of the aggregate supply curve, or short run aggregate supply curve, on its far right The aggregate supply function increases with tightness as producers are more likely to sell when tightness is high The general equilibrium can be represented as the intersection of aggregate demand Aggregates supply is the function of aggregate availability of labor and other resources in the given time period and the price levels for the production of those goods and services that provide the aggregate supply of those goods and services to the economy Aggregate Demand And Aggregate Supply are the macroeconomic view of the country’s total demand and supply curv Aggregate Demand Aggregate demand (AD) is the total demand for final goods and services in a given economy at a given time and price level Production Function 3 earliest people to use it (Charles Cobb was a mathematician Paul Douglas was an economist and later a US senator) Let’s verify that it satis es the properties we suggested For example, if the cost of specific raw materials, such as steel or petroleum, decreases because of more competition and companies offering the key resource, aggregate supply will increase The Aggregate Demand and Aggregate Supply Equilibrium provides information on price levels, real GDP and changes to unemployment, inflation, and growth as a result of new economic policy For example, if the government increases government spending, then it would shift Aggregate Demand (AD) to the right which would increase inflation, growth (real GDP) and employment The supply of all individual goods and services is also combined and referred to as aggregate supply Like the demand and supply for individual goods and services, the aggregate demand and aggregate supply for an economy can be represented by a schedule, a curve, or by an algebraic equation Figure 87 "Shift in the Aggregate Production Function and the Long-Run Aggregate Supply Curve" shows one possible shifter of long-run aggregate supply: a change in the production function Suppose, for example, that an improvement in technology shifts the aggregate production function in Panel (b) from PF 1 to PF 2 The aggregate supply-aggregate demand model uses the theory of supply and demand in order to find a macroeconomic equilibrium The shape of the aggregate supply curve helps to determine the extent to which increases in aggregate demand lead to increases in real output or increases in pric Perfect Competition & Welfare Outline Derive aggregate supply function Short and Long run equilibrium Practice problem Consumer and Producer Surplus Dead weight loss Practice problem Focus on profit maximizing behavior of firms Take as given the market demand curve Perfect Competition Firms and consumers are price-takers Firm can sell as much . Together the aggregate demand and aggregate supply curves , as a function of the price level Remember , Other variables may increase or decrease aggregate demand For example, expectations of the future will cause changes in aggregate demand If the future looks bleak, then The best way to graph a supply and demand curve in Microsoft Excel would be to use the XY Scatter chart A line graph is good when trying to find out a point where both sets of data intersects A column chart is good for displaying the variation between the data To graph a supply and demand curve . Aggregate supply is the capacity of the economy, the amount it will produce (or can produce) at a given price It is a function of the costs of production, level of technology, labour skills, incentives to production, taxation, capital, productivity and the labour market Aggregate supply, also known as total output, is the total supply of goods and services produced within an economy at a given overall price level in a given period It is represented by the . The aggregate demand is Q d (p) = 280 p; The equilibrium price satisfies the equation 25p 500 = 280 p if the solution of this equation is at least 20 The solution is p = 30; The output of each firm is (1/2)(30) 10 = 5 The supply and demand functions are shown in the following figure Aggregate supply is an aggregate analogue of the concept of supply for individual goods and services markets that is used in microeconomic analysis The aggregate supply of goods and services is usually taken to be related to the aggregate price level, a relationship that is called the aggregate supply function