Which of the following explains the shape of the short-run aggregate supply curve?
A) the inverse relationship between quantity supplied and cost per unit
B) the direct relationship between quantity supplied and cost per unit
C) the direct relationship between quantity supplied and price level
D) the inverse relationship between quantity supplied and GDP
E) the inverse relationship between quantity supplied and profit per unit

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is upward sloping, indicating a direct relationship between the quantity of goods and services supplied and the price level. As prices rise, the quantity supplied increases, and as prices fall, the quantity supplied decreases. This is because, in the short run, some production costs are fixed, and as prices rise, firms are willing to supply more because they can cover their costs and make additional profits.

Which of the Following Explains the Shape of the Short-Run