What's it: Wage rigidity refers to a situation where wages are insensitive to changes in supply-demand in the labor market. For instance, when the unemployment rate is high, wages do not fall even though the demand for labor declines and
Aggregate Supply
Long-Run Aggregate Supply (LRAS): Potential Output and Its Drivers
Long-run aggregate Supply (LRAS) is a fundamental concept in economics, revealing the maximum output an economy can produce when all its resources are fully adjustable. Unlike the short run, where some factors are fixed, LRAS reflects a situation
Physical Capital: Meaning, Importance, Effects on the Economy
What's it: Physical capital refers to man-made means to aid production. Economists classify it as a factor of production. Examples of physical capital are buildings, vehicles, machinery, and equipment. You can find the components in the fixed
Short-Run Aggregate Supply: Curve, Determinants and Shifts
Short-run aggregate supply (SRAS) is a crucial concept in economics. It reveals how much an economy produces (real GDP) at different price levels. Unlike the long run, where all factors are adjustable, the short run has some "sticky" elements, like
Aggregate Supply: Understanding Production Capacity in the Economy + Determinants
What it's: Aggregate supply (AS) is an economy's total goods and services. It behaves differently in the very short run, short run, and long run, each with a different elasticity. Short-run aggregate supply determines actual real
Very Short-Run Aggregate Supply: Definition and Reason Its Horizontal Curve
What's it: Very short-run aggregate supply refers to the aggregate supply in which firms change the output to a limited extent without changing prices. In this period, prices and most production costs are fixed, so firms can only adjust their