Can make at a set price, okay. And it shows the link. Between price and real GDP. Okay. So this is your sort of. Very, very simple version of it. Aggregate supply don't in a don't in an essay write stuff or things. It's just me explain it to you in the most simple term, okay? So it's the volume of goods and so the amount of products an economy can make at a set price, okay? And it's the link between price and real GDP. It tells us whether an economy has any availability to produce more things. Okay? And in the short run, the aggregate supply curve looks exactly like a normal supply curve apart from the fact that instead of quantity, you've got real GDP on the axis. Does that make sense so far? So that so Yeah volume goods and services produced within the economy are given price level. Okay. So the diagram is just that. Now, easy diagram for you to draw. You might want to sort of draw it down or get a screenshot or something because this could be one that you kind of try and we try and fit in that you throw in every you know essay, you know, the aggregate supply might be something we we think actually this is A, I mean, this is a very easy diagram, will take you 2s to draw this, wouldn't it? You could link it to anything at all. So we'll come back to this. We might it might be something we use a lot. Okay, so this diagram shows the short run, accurate supply in the short run. If a business wants to increase production, they need to increase the hours of works their employees do. Now, can you remember we talked yesterday, one of the big distinctions you wanted to know was what was the difference between micro and macro? Okay. And this is now because we'll I told you micro was about you know one business. And or person, you know it was about the individual, wasn't it? And it's usually in the short run, usually. Okay, so this diagram shows short run aggrecate splife in the short run, if a business wants to increase production, they need to increase the hours of work their employees do, okay? They will not so want to employ additional full time permanent staff as they would then be, I've lost my mouse thing. Oh, they would then be committed to them and have to potensisack them. If sales fell later, firms may decide to take on temporary workers or get present workers to work overtime or work harder. So show me on this diagram, you draw a shift in the short run aggregate supply if. If there would be a incentive, a bonus for workers to work harder, what would happen to the short run aggregate supply? Can you show me the shift in the short run aggregate supply? Wrong. Active supply may be just shift in the point in in price, changing price. Yeah could be there could be a change in price, but Yeah, you could change the price or there could be a shift in the short run aggregate supply if something changed it. Lovely Yeah so you can easily draw these you know with the shifts and anything in good so they might pay workers is more even though the basic way to say the same, both the average and marginal costs of labor produced will rise. If the business is paying more in wages for every good they produce, this would be passed on to consumer. Therefore the curve is upwards. Soaping okay, blah blah blah short run agsupply is is likely to be elastic. An increase in output by firms is likely lead to an increase in costs, which leads to a rise in prices as they PaaS these on to consumers. However, because the factor prices are constantly increase in prices will be relatively full, small, the demand falls. Firms will react by cutting prices and attempt to stimulate sales. This is just generally about demand and supply. There's nothing in here that's specifically about aggregate supply. Okay, this is key. We just did this very well. So a change in the price level will lead to a movement along the curve, which is exactly what you said. But a shift in this curve is caused by a range of other factors. Okay? So you're exactly right. If there's a change in the price level, like you said at the beginning, it could lead to a shift along the curve. But there is things that are kind of shift them. Okay. So there's two aggregate supply diagrams. One is for the short run, which is the one we've just looked at here, short run aggregate supply lied, and one is for the long run. There's actually three diagrams because there's two different long run aggregate supplies, but we'll come to that. So the short run is the period of time where at least one factor of production is fixed and cannot be changed. Now usually when you're talking about these sort of things, you say kind of under a year, etc. So what the the definition of the short run is that there is at least one thing that can't be changed. At least one factor of production is fixed and can't be changed on the aggregate supply curve in the short run, money, wages, factor prices. So the costs of making stuff and the state of technology are fixed and cannot change a change in these results in a shift in the curve. In the long run, all factors of production are variable. Okay? So in the short run, on that on that curve, we talked about where you where you show movements along. So where you are like you did here, where you're doing movements along the curve, it is not because of a change in wage rates, factor prices, technology, all that, they're all fixed, okay? Any change in something like wages, technology, the input prices that would all cause the shift that you drew, okay. In the long run, all factors of production are variable. And then like I said, there's two long run aggregate supply curves. So let me just let me get the key points on here so far. So I'm gonna to. Let me open ten up. Okay. So that's your definition and you got short run aggregate supply. Okay. And that's when at least one factor of production is fixed. And this is where we've got the. Something like wages. Okay. Before we go on. That is it. That's the short run aggregate supply summarised in its shortest, shortest form. Okay, explain that to me. Tell me, you know, the short run aggregate supply. Read it to me and make sure you understand it. Aggregate supply? Yeah what is agurgate supply and what's the short run aggregate supply? Aggregate supplies the curve of its a supply of goods and services in the economy at a given price level shows the relationship between GDP and price and and short run, as is at least one factor, production is fixed. And then that's it drawn. And then a movement along the curve is caused by what. Oh Yeah, a. Movement along the curves. Hello. Oh, I don't know what happened there. Can you hear me? I don't know what's gone on, so talk to me. If there was a change in price, show me short run aggregate supply shift in short run with, sorry, the movement in short run aggregate supply, there was a change in price. Movements in the aggregate supply. Aggregate supply is because of changing in price level like changing in taxation. Yegood, good. Very nice. Okay. And then the shift would be caused by something like wages, factor of production, price and technology. So you pick one of them, tell me what the situation is, and shift, tell me which way the curve 's going to shift. If that is shift, the shift caused by changing something like which factors of production, price and technology? Yeah. So it's like if you were making. Pens and the price of plastic went up or whatever you used to make plastic that would cause a shift in the aggregate surprinot the price of sell it. You know the price of the good. It's the price of the factor of production, the cost to make it. Does that make sense? No. Okay. To shift to shift it, it's a change in something like the factor of production price. A factor of production is a bit like an ingredient in a cake. You know if you were making a cake, you would put in all the ingredients. They're the factors of production. And if the price of flour went up, that would shift your aggregate supply. Okay. So come up with a scenario. Tell me about the shift. To a lawhichever way you want it depends what you say. I mean, maybe it can shape to the left. How would that happen? Well, if that if the curve shifts to the left, shift to the left, they may be caused by. Expensive raw materials, good, tell me. If the raw materials become more expensive. If that will be more expensive, that will. That it will make the product become more expensive sive. So become more expensive and the total cost will increase. So there's less GDP and less and maybe less GDP in this in the different price level. Good because because there's less supply and less you know production, less whatever else. Then there's a decrease in real GDP. Very nice. Yeah you how can you see how there you said basically a factor of production would increase. The cost of a factor of production would increase. Now you think how many times you would say that would increase the price of this in an essay, or how many times you could talk about that, and then how now you could link that into the short term aggregate supply ly, do you see how they all link together? To cancel. So you could say in all your long answer essays, you know your essays you talk about, you will always say something like. Causing an increase in the price of whatever, blah, blah, blah, blah, blah, blah, blah. It doesn't matter. And then you so say yousaid, I don't know land labor. It doesn't matter land labor raw materials, you know, it doesn't matter land labor. Doesn't matter which one. Okay? And then you could say exactly like you've just said, this causes a rent, the rent the rent of land increases or the labor force wants more wages. Good, right? So say you've put those points perfect, then in your essay you're gonna to link to what you've just said about the short run aggregate supply. Can you see how often you're gonna to say about things becoming more expensive in any of your exam questions you write? You're always going to say, like you just said, you came up with two excellent points there. And then you could always say, this causes the short run aggregate ates supply to shift to the left. Leading to an increase in price and. Overall decrease in. Real GDP. And then the extent. Hang on, hanlet me think, if else, let me make this better. Right, having me make this better. Causes the short run as to shift to the left, leading to an increase in price and an overall decreasase in real G D P. Meaning less goods and services are produced. And leading to a potential job. Which can lead to. Function refunction to Oh reduction sorry reduction sorry my typing. And then I want a bad one. I want a bad one. I'm trying to write one that you could use. I know. No leave leave at that for now, right? So. Anytime you talk about an increase in a fact, anything time you talk about a increase in like wages or an increase in a factor of production, land going up, labor, capital, enterprise, any of those factors of production going up, that will cause a short run aggregate spito shift to the left. So instead of just stopping at the wages will increase, you then are going to add what I've written in yellow in any essay. Can you see what I mean? Does that kind of help? And then you're linking in the economic concepts and you're expanding the answer. Now the other thing to remember is that obviously, if this is about coffee shops, you would add in the word coffee shop. Remember we talked about yesterday. If this is about a farm, you would add in farmers. So say I was writing a long essay about anything to do with farmers. Let's do farming. Okay, so and let's say this is court you've said and whatever it was, the increase in taxes has caused an increase in the price of a factor of production of land. You wouldn't just stop there, okay? You would then say this cause that you would then say what I've put in yellow, breed out what I've put in yellow. So an increase in the price of land and link it to farmers. Read what I've said and put. See if you can link it to farmers. Yeah so economic downturn, can I understand it to the form of economic recession? Okay. So the price of lands gone up, okay, this causes short run aggregate supply to shift to the left, leading to an increase in price and overall decreasase in real GDP, meaning less less if we're doing it. Farming means less ag. You know farming goods and services are produced, leading to potential job losses globally and across the country and especially in the farming community, which can lead to a reduction in living standards and overall economic downturn boom. You can apply it to any essay anytime you talk about the increase in labor our, the increase in land. So if you ever talk about weight leading to wage rises, you can then add this causes the shorter and aquate splight shift to the left. Does this make sense what I want you to do like or not really? You know like when you do your exams? Yeah, may sense. Yeah, sorry. I'm just, I'm just I've just copied onto a word document and I'm got to start keeping these because if you then learn this. Why is, why is it copied so weird? Don't know going on there. If you learn these, then instead of having to think every time what am I going to write in an essay? You just think, Oh, I'm going to write this one, Oh, I'm gonna to write this one and you can think of which diagrams you want to use, etc. So Yeah, good, right? So let's go back to have you got a copy if did you get a screenshot of that or a copy of that? No. Okay, grab that. Okay. Okay. Okay. So then we've got long run aggregate supply. Okay, so long run aggregate supply in the short runank Spike b increased by offering over time, but in the long run, there will be a limit on how much supply can be increased. Okay? So in the short term, I could say to you, Jackson, you need to work 24 hours a day or two days, and you could like produce more, you could supply more, but that cannot continue. You know, there is a limit to how long you could do that for. And there's a limit on how much if you were making pens, there's a limit on how many pens you can make. It gets to the point where you physically and with the resources you have and everything else can make any more. Even if you wanted to, even if everything was given to you to help you, you couldn't make any more because you've just reached the maximum. There's always a maximum Yeah so there is a limit of the number of people and machines that are available. And once labor, our productivity is maximized. Can you remember what labour productivity is? Doesn't matter. You're not, I'll tell you. Can you remember what labor our productivity is? No, okay. Labor productivity is how how productive each person is, okay? So how many goods or services they make in a day or a week or an hour? So you might have, you know, it's a way of comparing one person against another. So me and you might be working at the same factory, and you may make 100 phones a day and I may make 50. Your labour productivity is higher, okay? You produce more things a day than I do with both one person, but you produce double me. And businesses want to increase labor productivity because they're paying usually the same wage or a similar wage to people, and they want to get as much out of that person as possible so they can do things to try and increase labor, our productivity. So they might train you, they might give you training, they might give you a new machine, they might give you a machine that makes your job easier. So labor productivity is how much stuff, how many things that person makes and how productive they are. Okay? The output of each individual. That makes sense, okay? But there is a limit, okay? A person can only be so productive, you know that it becomes a limit. So so therefore, supply can't be increased any further. And on the long run, aggregate supply wage rates are variable and can change in the long run. Aggreate supply lies independent of the price level and is tered by the level of all factors of production and the quality of technology. Okay? So in the long run, aggregate Spike doesn't depend on the price level. It's determined by the level of all facts of production and the quality of technology. Okay? So. The long run aggregates fly. Or it's termed like quality and availability of all factors of production. Okay, that's your definition, the long run. So in the long run, how much stuff can I make? That's what the long run aggregate supply lies showing me long term, how much stuff can this country make, can this business make, can this person make? Whatever? And that's determined by that's generated by the quality and the availability. So how much and how good all your factors of production are. If you haven't got those factors of production or you haven't got very many of the factors of production, you're longer in aggregate supplies, you're know going to be small. If you've got lots of factors of production, your lower run aggregate supply is going to be large. Okay? If you think the long run aggregate supply of China huge, if you think the long run aggregate supply of somewhere a small country, Luxembourg, very small, because you haven't got the same factors as a production of labor, you probably got the same factors as a production of land. You haven't got the same fact as a production of probably enterprise. To be fair, people, you know, starting businesses because you got as many people. So depending on how much and how good your factors of production are, depends on your long run aggregate supply. Does that make sense? Yeah Yeah maybe Yeah maybe okay. So you are at full capacity where the resources are being fully used, okay. So tell me why. China would have a sort of higher long run aggregate supply than the uk. I alone wrong agagree supply because people, because China has more workforce. They would definitely have so a social can product produce more product. I mean, they can supply more products. So the machinery maybe become improved and the capital will be and the capital will be better. So more enterprise will live there and more reover China. Maybe maybe China has more land. Than than the uk. So they have more areas to. The are more areas to to build up the factories and firms. Very nice. Good, good, very good. Okay. And then so China has definitely a bigger potential, maximum potential for all the reasons you've said, and it would have a higher long run aggregate supply. However, this is a okay, so a vertical aggregate supply curve is based on the classical view. There's two aggregate supply curves. That market tends to correct themselves fairly quickly, though an economy can be in sequilibrium in any moment in time, it will naturally move towards equilibrium and it will move towards where all resources are employed. And this means it's at it's most productive. So your long run aggregate supply curve looks like that. So regardless of the price, the output level stays the same in the long run. Okay. So that's your long run aggregate supply curve. Again, notice its price and real GDP on your axis. So very simple, long run aggregate supply. If you just do it in an exam. Okay, that's one diagram. This is the other long. This is probably the is this the one you've seen more? Have you seen this one or have you seen the vertical one or do you not know? Yeah, that is nesium long run aggregate supply. Very good. Yeah. Yeah. So this one is the other aggregate supply. It's the idea that an economy can be disequilibrium for 20, 30 years. It can't be correct to imply the aggregate supply curve is vertical. So he came up with his own. So the difference between them is the classical one says that actually economies correct themselves very quickly and go back towards equilibrium, whereas his is actually it can take longer, 20 to 30 years. And therefore there will be times where it's not in equilibrium unlike the classical model. So at the end of it, it's the same as the classical view in that. Okay, we've reached the production possibility frontier. We've gone as far as we can go. We can't go any further with the current resources we have. So therefore, we've maximized our resources. However, it does not stay vertical. If it was vertical, it means that wages and price will fall. Okay. So what would shift a long run aggot supply curve. So a shift along and agwill gate supply to the right. Would mean that economies are now able to produce more. In exactly the same way we would think, how do you think the obvious way Oh, it's there. Would you think the obvious way of shifting the long run aggregate spto the right would be, why would a country suddenly be able to produce more. Because when economics economies are able to produce more, they can increase the real GDP. And. And reduce the price. Good. I don't know about well, Yeah, but what about why? Why would they? Why would it shift? What causes an economy to be able to produce more? It's the same reason that when we draw it like this, remember, when we draw the production possibility frontier. What causes that shift? Can you remember what causes the outward shift? No, it gets with. You're in a country, okay? You're running a country, China. Let's let's say China. Why has China been able to make so much stuff? Why is it immigration would be one? Money maybe maybe there's a there's an increase in the net immigration. Talk to me about that. Go on. If there is more people willing to live in this country, they can take new experience and technology. And you've arenright stop, stop, stop, stop, stop, stop. You've you've given two answers in one there. And you've you've just used the word technology, which was the big one. So split them up. Talk to me about keep on immigration and then talk to me about technology. Talk about them separately. They're two very good, very separate points. Yeah. I don't want you to mix them up and kind of lose it in there. So both of those would impact it. So do immigration first or technology first, whichever one, but don't mix them together because they're two excellent points. Okay, go. So why would immigration, net immigration increase? They can make new experiences and that that can improve the technology of Prof productivity. So they can product produce more. They can make more products and increase real G D P. Then the price level will decrease because the real be, because the amount of the products will be will be more. Yeah, good. Very nice. Very nice. Yep. So tech, technology and labor, our other one will net immigration, other ones, productivity, this one, changing this one, why would change education and skills increase, shift the long run aggregate supply to the right? And in changes in education and skills. I would change education skills, shift equiate education skills, maybe have spmaybe. They can increase times of compulsory education, and that will increase the average education levels. This will increase our experience and improve the technology as well. Good. Yeah which Yeah because actually if people are more educated, they are more placed to come up with new technologies and you know they come up with better ideas, don't they? It's by looking at you know like more like the amount that is of looking for that the American universities, you know they educate people better. And then the technology comes out of those educated people. They they create you know clever people that come up with their problem solvers. Only good changes in government regulation. Why would the changes in rules would the government change? The longer an aggregate supply shift? The longer an aggregate supply, what government changes do you think would shift it? I know there's some ideas here. Increase the size of workforce and encourage people to go back to your worker. Maybe they can. Maybe they can. Maybe they can. Reply. Maybe second delay the entiment the entirement yes, good, excellent. Tell me. Yeah if they if they release and. The retirement age, there were more people will in work because. Because it's just super for the initial retirement age and they have to work now. So there will be more workforce and this and these old workers have some have their own experience to solve some problems. So that will improve the technology. Good. Very nice. What about tell me, if they reduce the benefits that they pay, pay people when they don't work, how would that increase? How would that shift the lower run out can supply? If if many people don't walk, no, if don't walk. If the government say, you know how the governpay people who like are unemployed or are sick or something, the benefits. If they suddenly say no benefits, what would that do? They reduce the benefits. Very simple. If there's no benefits. One is if there's no benefits. Well, if there's no benefits, there's just people just having one choice. That is to go to find a work to find a job. So the workforce will still increasing. And. And I don't know things that that can increase improved technology. I don't think no, no, it wouldn't improve the technology, but it would still would they wouldn't have any choice. So they would have to work. So therefore, quate supply would shift, long run agquate supply would shift to the right because there's more workforce. Exactly right. Exactly right. So can you see, however, if you're talking about changing government benefits, if you're talking about immigration, if you're talking about like government policies, if you're talking about tech technology, if you're talking about anything like that, you could draw or mention the long run aggregate supply shifting to the right? So you know how you would say this would shift the long run aggregate supply to the right? Yes, you want to add it in your essays. So if we got a long run aggregate supply. Have you got any questions about. This no, no, is there anything that hang on, let me just how would you. And. Don't think what else we could link to it. How would you. What you think would happen with the long run aggregate supply if there was a war? If a country was involved in a war, we said war. Many people were attending to the war. So. So that means less people less people can work, which does increase. Less workforce will decrease because many people of fighting. Good. Leading to what with the long run aggregate supply. So the leading to the long run aggregate supply shipped to the left because labor is decreased. Very nice. What would happen if. The government, I don't be that because I come come up with an idea. What would happen if the government made it easier to start a business, so they reduced regulations and laws, so they made it easier for people to start businesses in the country. What would happen to the long run, aggregate supply and why? I don't know. I think so. If the government made it easy to start businesses in a country, what would that mean? Would more people, easy to start, to start business, start businesses? Yeah. Start new businesses, easier for entrepreneurs, easier to start businesses. The cut the government said, Yeah, I tell you, where does that? A lot to buy? Low taxes, easy to you encourage people to make innovations. Keep going. Tell me if that will make people, encourage people to make innovations, that means there are more potential jobs will increase labor force and this innovation may improve the technology. So anyway, the labor and labor will increase, so the long run aggregate supply will shift to the right. Very nice. Yes. Yes. Is that okay? So just think with everything long run aggregate supply, if you can sort of include it in your essays, your longer mark essays. All right. If you got any questions or anything, do you want me to send you this thing or have you got this? Yeah, Yeah, okay. All then all right then all right. Okay catlater bye bye bye.