4.3.7—AS determinants

Aggregate supply shifts when firms’ cost conditions or productive capacity change. Wage and raw-material costs, taxes, subsidies, productivity, technology, labour force, capital stock and supply shocks are key determinants.

Lower unit costs or greater capacity shift AS right; higher costs or a destructive shock shift it left. State whether the change affects output, the price level or both through the model.

A fall in energy prices can shift AS right, while a supply-chain disruption can shift it left and create cost-push inflation pressure.

A higher price level alone is movement along AS; a cost change shifts the curve.