Practise distinguishing a movement along an AD or AS curve due to a price change from a curve shift caused by determinants such as taxes, costs, confidence or investment.
Explain, with the help of a diagram, the difference between what causes (i) a movement along an aggregate supply curve and (ii) a shift in an aggregate supply curve.
For correct diagram:
- axes correctly labelled: price level, GDP/real output (1 mark)
- AS/AD correctly labelled (1 mark) (KU: up to 2 marks)
- explanation of a movement along an AS curve (up to 3 marks)
- explanation of a shift in an AS curve (up to 3 marks) (APP up to 6 marks)
8
Movement along an AS curve:
- this is caused by a change in the price level;
it could also be caused by a change in the AD curve and there is then a movement along an AS curve to restore the equilibrium position
Shift in an AS curve:
- this is caused by any reason other than a change in the price level, e.g. a change in the costs of factors of production, a change in the taxes on firms, a change in the productivity/quality of inputs or a change in the quantity of resources