The Short-Run Aggregate Supply (SAS) curve slopes upward in the AS-AD model due to several reasons:

1. Sticky-Wage Theory: According to this theory, the wages of the workers are sticky in the short run. This means that they do not adjust quickly to the changes in the economy. When the price level rises, the wages remain the same, which means the firms can afford to hire more workers, leading to an increase in production. This results in an upward slope of the SAS curve.

2. Sticky-Price Theory: This theory suggests that the prices of goods and services are slow to respond to changes in supply and demand. Therefore, when the demand for goods and services increases, firms are more likely to meet this demand by increasing production rather than increasing prices, leading to an upward slope of the SAS curve.

3. Misperceptions Theory: According to this theory, when the price level increases, firms may mistake this as an increase in relative prices, which would lead them to increase production. This also results in an upward slope of the SAS curve.

In conclusion, the SAS curve slopes upward because an increase in the price level in the short run leads to an increase in output.

Question

The Short-Run Aggregate Supply (SAS) curve slopes upward in the AS-AD model due to several reasons:

1. Sticky-Wage Theory: According to this theory, the wages of the workers are sticky in the short run. This means that they do not adjust quickly to the changes in the economy. When the price level rises, the wages remain the same, which means the firms can afford to hire more workers, leading to an increase in production. This results in an upward slope of the SAS curve.

2. Sticky-Price Theory: This theory suggests that the prices of goods and services are slow to respond to changes in supply and demand. Therefore, when the demand for goods and services increases, firms are more likely to meet this demand by increasing production rather than increasing prices, leading to an upward slope of the SAS curve.

3. Misperceptions Theory: According to this theory, when the price level increases, firms may mistake this as an increase in relative prices, which would lead them to increase production. This also results in an upward slope of the SAS curve.

In conclusion, the SAS curve slopes upward because an increase in the price level in the short run leads to an increase in output.

Knowee AI · Accepted Answer

The Short-Run Aggregate Supply (SAS) curve slopes upward in the AS-AD model due to several reasons:

1. Sticky-Wage Theory: According to this theory, the wages of the workers are sticky in the short run. This means that they do not adjust quickly to the changes in the economy. When the price level rises, the wages remain the same, which means the firms can afford to hire more workers, leading to an increase in production. This results in an upward slope of the SAS curve.

2. Sticky-Price Theory: This theory suggests that the prices of goods and services are slow to respond to changes in supply and demand. Therefore, when the demand for goods and services increases, firms are more likely to meet this demand by increasing production rather than increasing prices, leading to an upward slope of the SAS curve.

3. Misperceptions Theory: According to this theory, when the price level increases, firms may mistake this as an increase in relative prices, which would lead them to increase production. This also results in an upward slope of the SAS curve.

In conclusion, the SAS curve slopes upward because an increase in the price level in the short run leads to an increase in output.

Explain why in the AS-AD model presented in lectures the short-run aggregate supply (SAS) curve slopes upward

Question

Explain why in the AS-AD model presented in lectures the short-run aggregate supply (SAS) curve slopes upward

Solution

Similar Questions

Upgrade your grade with Knowee