Warm-Up: What is the difference between demand-pull inflation and cost-push inflation?
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Warm-Up: What is the difference between demand-pull inflation and cost- push inflation?
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Transcript of Warm-Up: What is the difference between demand-pull inflation and cost-push inflation?
Warm-Up:
What is the difference between demand-pull inflation and cost-push inflation?
Starting Point:
PL1
O/E1 O/E
A
PL
AS
AD
Increase in AS:
PL1
O/E1 O/E
A
PL
B
AS
AS2
PL2
O/E2
PL: _______
O/E: _______
Decrease in AS:
PL1
O/E1 O/E
A
PL
B
AS
AS2
PL2
O/E2
PL: _______
O/E: _______
DETERMINANTS OF AGGREGATE SUPPLYDETERMINANTS OF AGGREGATE SUPPLY
1.1.Resource PricesResource Prices2.2.ProductivityProductivity3.3.Production TechnologyProduction Technology4.4.Government Taxes and Government Taxes and
RegulationRegulation
Determinants of Determinants of ASAS
DefinitionDefinition Increase in ASIncrease in AS
(MAKE MORE)(MAKE MORE)
Decrease in ASDecrease in AS
(MAKE LESS)(MAKE LESS)
1. Resource 1. Resource PricesPrices
2.2.ProductivityProductivity
3. Production 3. Production TechnologyTechnology
4. Gov’t taxes 4. Gov’t taxes and regulationsand regulations
Determinants of Determinants of ASAS
DefinitionDefinition Increase in ASIncrease in AS
(MAKE MORE)(MAKE MORE)
Decrease in ASDecrease in AS
(MAKE LESS)(MAKE LESS)
1. Resource 1. Resource PricesPrices
The price it takes The price it takes for business to for business to
make their goods make their goods and/or servicesand/or services
2.2.ProductivityProductivity How efficient the How efficient the labor force islabor force is
3. Production 3. Production TechnologyTechnology
The development The development of new and better of new and better
technologytechnology
4. Gov’t taxes 4. Gov’t taxes and regulationsand regulations
Laws and Laws and regulations that regulations that the gov’t passes the gov’t passes for all businesses for all businesses
to adhere toto adhere to
Determinants of Determinants of ASAS
DefinitionDefinition Increase in ASIncrease in AS
(MAKE MORE)(MAKE MORE)
Decrease in ASDecrease in AS
(MAKE LESS)(MAKE LESS)
1. Resource 1. Resource PricesPrices
The price it takes The price it takes for business to for business to
make their goods make their goods and/or servicesand/or services
If resource prices If resource prices goes down, AS goes down, AS
shifts to the right. shifts to the right. (make more)(make more)
If resource prices If resource prices goes up, AS shifts goes up, AS shifts to the left. (make to the left. (make
less)less)
2.2. ProductivityProductivity How efficient the How efficient the labor force islabor force is
3. Production 3. Production TechnologyTechnology
The development The development of new and better of new and better
technologytechnology
4. Gov’t taxes 4. Gov’t taxes and regulationsand regulations
Laws and Laws and regulations that regulations that the gov’t passes the gov’t passes for all businesses for all businesses
to adhere toto adhere to
Determinants of Determinants of ASAS
DefinitionDefinition Increase in ASIncrease in AS
(MAKE MORE)(MAKE MORE)
Decrease in ASDecrease in AS
(MAKE LESS)(MAKE LESS)
1. Resource 1. Resource PricesPrices
The price it takes The price it takes for business to for business to
make their goods make their goods and/or servicesand/or services
2.2. ProductivityProductivity How efficient the How efficient the labor force islabor force is
If labor If labor productivity productivity
increases, AS increases, AS shifts to the right.shifts to the right.
If labor productivity If labor productivity decreases, AS decreases, AS shifts to the left.shifts to the left.
3. Production 3. Production TechnologyTechnology
The development The development of new and better of new and better
technologytechnology
4. Gov’t taxes 4. Gov’t taxes and regulationsand regulations
Laws and Laws and regulations that regulations that the gov’t passes the gov’t passes for all businesses for all businesses
to adhere toto adhere to
Determinants of Determinants of ASAS
DefinitionDefinition Increase in ASIncrease in AS
(MAKE MORE)(MAKE MORE)
Decrease in ASDecrease in AS
(MAKE LESS)(MAKE LESS)
1. Resource 1. Resource PricesPrices
The price it takes The price it takes for business to for business to
make their goods make their goods and/or servicesand/or services
2.2. ProductivityProductivity How efficient the How efficient the labor force islabor force is
3. Production 3. Production TechnologyTechnology
The development The development of new and better of new and better
technologytechnology
If you have new or If you have new or better technology, better technology,
AS shifts to the AS shifts to the right.right.
If you develop no If you develop no technology, AS technology, AS shifts to the left.shifts to the left.
4. Gov’t taxes 4. Gov’t taxes and regulationsand regulations
Laws and Laws and regulations that regulations that the gov’t passes the gov’t passes for all businesses for all businesses
to adhere toto adhere to
Determinants of Determinants of ASAS
DefinitionDefinition Increase in ASIncrease in AS
(MAKE MORE)(MAKE MORE)
Decrease in ASDecrease in AS
(MAKE LESS)(MAKE LESS)
1. Resource 1. Resource PricesPrices
The price it takes The price it takes for business to for business to
make their goods make their goods and/or servicesand/or services
2.2. ProductivityProductivity How efficient the How efficient the labor force islabor force is
3. Production 3. Production TechnologyTechnology
The development The development of new and better of new and better
technologytechnology
4. Gov’t taxes 4. Gov’t taxes and regulationsand regulations
Laws and Laws and regulations that regulations that the gov’t passes the gov’t passes for all businesses for all businesses
to adhere toto adhere to
If less laws and If less laws and regulations are regulations are
passed, AS shifts passed, AS shifts to the right.to the right.
If more laws and If more laws and regulations are regulations are
passed, AS shifts passed, AS shifts to the left.to the left.
Determinants of Determinants of ASAS
DefinitionDefinition Increase in ASIncrease in AS
(MAKE MORE)(MAKE MORE)
Decrease in ASDecrease in AS
(MAKE LESS)(MAKE LESS)
1. Resource 1. Resource PricesPrices
The price it takes The price it takes for business to for business to
make their goods make their goods and/or servicesand/or services
If resource prices If resource prices goes down, AS goes down, AS
shifts to the right. shifts to the right. (make more)(make more)
If resource prices If resource prices goes up, AS shifts goes up, AS shifts to the left. (make to the left. (make
less)less)
2.2. ProductivityProductivity How efficient the How efficient the labor force islabor force is
If labor If labor productivity productivity
increases, AS increases, AS shifts to the right.shifts to the right.
If labor productivity If labor productivity decreases, AS decreases, AS shifts to the left.shifts to the left.
3. Production 3. Production TechnologyTechnology
The development The development of new and better of new and better
technologytechnology
If you have new or If you have new or better technology, better technology,
AS shifts to the AS shifts to the right.right.
If you develop no If you develop no technology, AS technology, AS shifts to the left.shifts to the left.
4. Gov’t taxes 4. Gov’t taxes and regulationsand regulations
Laws and Laws and regulations that regulations that the gov’t passes the gov’t passes for all businesses for all businesses
to adhere toto adhere to
If less laws and If less laws and regulations are regulations are
passed, AS shifts passed, AS shifts to the right.to the right.
If more laws and If more laws and regulations are regulations are
passed, AS shifts passed, AS shifts to the left.to the left.
Complete the following scenarios Complete the following scenarios with your partnerwith your partner
The auto industry is The auto industry is experiencing an experiencing an increase in the price increase in the price of steel. Using AD/AS of steel. Using AD/AS analysis, show the analysis, show the effects of aggregate effects of aggregate supply, prices and supply, prices and output/employment.output/employment.
Shift the AS curve?Shift the AS curve?
Labor productivity in Labor productivity in the U.S. is on the rise. the U.S. is on the rise. Graph the situation Graph the situation and show how and show how aggregate supply, aggregate supply, prices and prices and output/employment output/employment are affected.are affected.
Shift the AS curve?Shift the AS curve?
Improved technology Improved technology has been developed has been developed in the U.S. computer in the U.S. computer industry. Graph the industry. Graph the situation and show situation and show how aggregate how aggregate supply, prices and supply, prices and output/employment output/employment are affected. are affected.
Shift the AS curve?Shift the AS curve?
New government New government regulations have been regulations have been passed by Congress passed by Congress to improve the safety to improve the safety of SUVs. Graph the of SUVs. Graph the situation and show situation and show how aggregate how aggregate supply, prices and supply, prices and output/employment output/employment are affected.are affected.
Shift the AS curve?Shift the AS curve?
Labor productivity in Labor productivity in the computer industry the computer industry has been rising at a has been rising at a faster rate than faster rate than worker’s wages. worker’s wages. Graph the situation Graph the situation and show how and show how aggregate supply, aggregate supply, prices and prices and output/employment output/employment are affected.are affected.
Complete the Following Graphs for Aggregate Supply on your own paper Complete the Following Graphs for Aggregate Supply on your own paper (10 pts. Ea)(10 pts. Ea)
41) Labor productivity in the U.S. is on the rise. 41) Labor productivity in the U.S. is on the rise. Graph the situation and show how Graph the situation and show how aggregate supply, prices and aggregate supply, prices and output/employment are affected.output/employment are affected.
42) New government regulations have been 42) New government regulations have been passed by Congress to improve the safety passed by Congress to improve the safety of SUVs. Graph the situation and show how of SUVs. Graph the situation and show how aggregate supply, prices and aggregate supply, prices and output/employment are affected.output/employment are affected.
