Suppose the price of a major commodity like oil decreases dramatically and unexpectedly. The SRAS curve will and the LRAS curve will _
shift right; not change
When oil is less expensive, it is less costly for firms to transport their goods, and lower transportation costs will make it less expensive to purchase the inputs that are needed for production. Additionally, the lower price of oil will reduce electricity cost and the cost of producing products made from oil. These changes will shift the aggregate supply curve out (to the right), as firms want to supply more goods at any given price level.A change in oil prices does not represent a change in the availability of factors of production. Therefore, such a change does not fundamentally alter the ability of the economy to produce goods and services. There may be substitution between different goods that the economy produces, or the price of outputs may adjust, but potential output is not affected.

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chipmunk4225 chipmunk4225

24-11-2022
Social Studies

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Suppose the price of a major commodity like oil decreases dramatically and unexpectedly. The SRAS curve will and the LRAS curve will _
shift right; not change
When oil is less expensive, it is less costly for firms to transport their goods, and lower transportation costs will make it less expensive to purchase the inputs that are needed for production. Additionally, the lower price of oil will reduce electricity cost and the cost of producing products made from oil. These changes will shift the aggregate supply curve out (to the right), as firms want to supply more goods at any given price level.A change in oil prices does not represent a change in the availability of factors of production. Therefore, such a change does not fundamentally alter the ability of the economy to produce goods and services. There may be substitution between different goods that the economy produces, or the price of outputs may adjust, but potential output is not affected.

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AnnuG AnnuG · Answer 1 · 2022-11-29T04:51:28+01:00

Suppose the price of a major commodity like oil decreases dramatically and unexpectedly. The SRAS curve will shift right and the LRAS curve will not change.

Cheaper oil makes it cheaper for companies to transport their goods, and because shipping costs less, it costs less to buy the raw materials needed for production. In addition, lower oil prices reduce the cost of electricity and the cost of making products from oil. These changes shift the aggregate supply curve outward (to the right) as firms try to supply more goods at a given price level.

Changes in oil prices do not represent changes in the availability of factors of production. Therefore, such changes do not fundamentally change an economy's ability to produce goods and services. There may be substitutions among various goods and adjustments in product prices, but potential output is not affected. This is important because it shows that when prices rise, so does the level of real GDP. In this case, when oil prices plunge, the short-term aggregate supply curve shifts to the right.

Learn more about short run aggregate supply(SRAS) on:

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