The short-run aggregate supply curve slopes upward because of:
A) wage and price stickiness.
B) wage and price flexibility.
C) increasing technology.
D) a reduction in resource availability at higher price levels.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve slopes upward because of wage and price stickiness. This means that in the short-run, firms are slow to adjust their prices and wages in response to changes in demand and supply conditions, causing output to respond to changes in demand at the existing price level. As a result, an increase in demand will lead to an increase in output and prices in the short-run. Similarly, a decrease in demand will lead to a decrease in output and prices as firms fail to adjust their prices and wages immediately.

The Short-Run Aggregate Supply Curve Slopes Upward Because Of