IB Economics Topic 3.2.6 Shifts of the SRAS Curve Revision Notes (SL/HL)

IB Economics Topic 3.2.6 Shifts of the SRAS Curve Revision Notes (SL/HL) | RevisionDojo

Written by official IB examiners

The Price Level (PL) of an economy is not the only factor that affects its short-run aggregate supply (SRAS).
While changes in the PL cause movements along the SRAS curve, changes in the determinants of short-run aggregate supply shift the SRAS curve.

Definition

Determinants of short-run aggregate supply

Factors that shift the SRAS curve.

The determinants of SRAS covered in the IB curriculum are:

Costs of factors of production.
Indirect taxes.

Note

The most important thing to note in this topic is that:

Changes in price level cause changes the quantity of real GDP produced (causing a movement along the SRAS curve).
Changes in the determinants of SRAS lead to changes in the quantity of real GDP produced at all possible price levels (causing a shift of the SRAS curve).
1. A rightward shift indicates that at all given price levels, the total quantity of real GDP produced increases.
2. A leftward shift indicates that at all given price levels, the total quantity of real GDP produced decreases.

Exam technique

In IB Economics long-answer questions, it is very important to explain processes step-by-step, without skipping any steps.

In this section, the effect of changes in the determinants of SRAS will be explained in such way.

Costs of factors of production

Increase in the costs of factors of production → leftward shift in SRAS

Factors of production refer to the resources used in the production process (land, labour, capital, entrepreneurship).
If the costs of these factors increase (higher wages, rising raw material prices...), production becomes more expensive for firms.
As a result, to maintain profit margins, firms across the economy decrease their production at all possible price levels.

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Note

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Excepteur sint occaecat cupidatat non proident

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Tip

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Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

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The Price Level (PL) of an economy is not the only factor that affects its short-run aggregate supply (SRAS).
While changes in the PL cause movements along the SRAS curve, changes in the determinants of short-run aggregate supply shift the SRAS curve.

Definition

Determinants of short-run aggregate supply

Factors that shift the SRAS curve.

The determinants of SRAS covered in the IB curriculum are:

Costs of factors of production.
Indirect taxes.

Note

The most important thing to note in this topic is that:

Changes in price level cause changes the quantity of real GDP produced (causing a movement along the SRAS curve).
Changes in the determinants of SRAS lead to changes in the quantity of real GDP produced at all possible price levels (causing a shift of the SRAS curve).
1. A rightward shift indicates that at all given price levels, the total quantity of real GDP produced increases.
2. A leftward shift indicates that at all given price levels, the total quantity of real GDP produced decreases.

Exam technique

In IB Economics long-answer questions, it is very important to explain processes step-by-step, without skipping any steps.

In this section, the effect of changes in the determinants of SRAS will be explained in such way.

Costs of factors of production

Increase in the costs of factors of production → leftward shift in SRAS

Factors of production refer to the resources used in the production process (land, labour, capital, entrepreneurship).
If the costs of these factors increase (higher wages, rising raw material prices...), production becomes more expensive for firms.
As a result, to maintain profit margins, firms across the economy decrease their production at all possible price levels.

Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics

IB Economics 3.2.6 Shifts of the SRAS Curve Notes

Costs of factors of production

Increase in the costs of factors of production → leftward shift in SRAS

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account

Costs of factors of production

Increase in the costs of factors of production → leftward shift in SRAS

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account

1. Introduction to Economics2 subtopics

2. Microeconomics12 subtopics

3. Macroeconomics7 subtopics

4. The Global Economy10 subtopics