HOW DOES INFLATION AFFECT CONSUMERS PART IX

THERE ARE TWO TYPES OF CURVES THAT DEFINES THE AGGREGATE SUPPLY SHORT-RUN AGGREGATE SUPPLY (SRAS) FOR ONE ORGANIZATION TO INCREASE ITS PRODUCTIVITY WITHOUT HAVING TO DO IT ALL FROM THE START, AND SECOND IS LONG-RUN AGGREGATE (LRAS) THAT IS USED FOR INVESTING IN SOMETHING NEW AND SETTING UP THE STRUCTURE.

THE SRAS CURVE IS POSITIVELY SLOPED AND DEFINES THE ONE-TO-ONE RATIO BETWEEN THE PRICE LEVEL AND REAL PRODUCTION, WHEREAS THE LRAS INDICATING THAT THE REAL PRODUCTION IS INDEPENDENT OF THE PRICE LEVEL. WHEN THESE CURVES ARE CONSTRUCTED THE DETERMINANTS OF THE AGGREGATE SUPPLY ARE ASSUMED CONSTANT. THESE DETERMINANTS CAN HAVE A DIRECT EFFECT ON BOTH THE CURVES OR ON ONE DEPENDING ON THE DETERMINANT FOR EXAMPLE FLOW OF NET INVESTMENT THAT YIELDS PRODUCTIVITY WILL EFFECT BOTH OF THEM AND CAUSE THE AGGREGATE SUPPLY TO SHIFT RIGHT.

WHEREAS THE HURDLES IN RAW MATERIAL ON TEMPORARY BASIS DUE TO WEATHER CONDITIONS OR DELAYS DUE TO TRAFFIC THAT EFFECTS THE PRODUCTION EFFECTS THE SRAS WHEREAS THE LRAS WILL REMAIN CONSTANT. ALSO ON THE BASIS OF CHANGES IN THE EXPECTATIONS OF THE INFLATION, SRAS MIGHT SHIFT TO THE LEFT IF THE PRODUCERS BELIEVE THAT THEY CAN SELL IT IN THE FUTURE FOR MORE PROFITS NOT EFFECTING THE LRAS.

AGGREGATE SUCH “EMPLOYEES”, IT IS A PERSON OR A GROUP OF PERSONS EMPLOYED FOR WAGES OR SALARY AT AN ORGANIZATION, ESPECIALLY AT NON-EXECUTIVE LEVEL. NUMBER OF EMPLOYEES AND THEIR WAGES PLAY AN IMPORTANT ROLE IN DETERMINING THE AGGREGATE SUPPLY OF NATION. LET’S START BY CONSIDERING A FACT THAT AGGREGATE SUPPLY WILL INCREASE WITH THE ABILITY TO PRODUCE MORE BY THE PRODUCERS, SO THUS HAVING LARGE NUMBER OF EMPLOYEES COULD RESUME IN THE GROWTH OF THE AGGREGATED SUPPLY, HOWEVER, CONSIDERING THE SECOND FACTOR THEIR WAGES IF THEY ARE BEING PAID HIGHLY OR THE WAGES EXPENSES OF COMPANY ARE HIGHER THAN THE PRICE OF THE PRODUCTION AND THE OUTPUT WILL TO THE DECREASE IN THE PRODUCTION OF THE SUPPLY.

SO IT CONSIDERED TO BE THE BEST STRATEGY BY THE ORGANIZATION TO EMPLOYEE REQUIRED NUMBER OF PEOPLE ON MODERATE WAGES TO CUT DOWN PRODUCTION COST AND INCREASE THE SUPPLY, THUS BETTER AGGREGATE SUPPLY BY SPENDING LESS. AND LASTLY CONSIDERING THE FACTOR THAT THE INCREASE OF TECHNOLOGY HAS AUTOMATED MOST OF THE PROCESSES AND DUE TO WHICH THE AGGREGATED SUPPLY HRS INCREASE OVERALL AND IS THE UNEMPLOYMENT BUT BETTER SUPPLY.

WE HAVE DISCUSSED ABOUT WHAT THE AGGREGATED SUPPLY IS AND THE MAJOR GOODS AND FACTORS AFFECTING IT AND CAN EASILY SAY THAT AGGREGATE SUPPLY IS THE ABILITY OF A COUNTRY TO PRODUCE AND FOR IN ORDER TO MEET THE REQUIREMENT AND INCREASING THE CAPITAL. REGARDING THE EMPLOYEES, IT IS TRUE TO SAY THAT THE NUMBER OF EMPLOYEES WORKING AND THEIR WAGES EFFECT THE AGGREGATE SUPPLY DIRECTLY AND DEPENDING ON HOW THEY ESPECIALLY IN ABUNDANCE CAN PROVE LESS BENEFICIAL AS COMPARED TO THE FEW HANDFULS THAT ARE REQUIRED FOR IN ORDER TO PRODUCE MORE AND KEEPING THE DEMANDS OF THE PRODUCT HIGH FOR FUTURE PRODUCTIONS.

REFERENCES HTTP://WWW.ECONOMICSONLINE.CO.UK/MANAGING_THE_ECONOMY/AGGREGATE+SUPPLY.HTML

HTTP://WWW.TUTOR2U.NET/ECONOMICS/REFERENCE/AGGREGATE-SUPPLY HTTP://WWW.AMOSWEB.COM/CGI-BIN/AWB_NAV.PL?S=WPD&H=AGGREGATE+SUPPLY+DETERMINANTS

HTTP://STUDY.COM/ACADEMY/LESSON/AGGREGATE-SUPPLY-IN-THE-ECONOMY-DEFINITION-AND-DETERMINANTS.HTML

HTTP://WWW.INVESTOPEDIA.COM/EXAM-GUIDE/CFA-LEVEL-1/MACROECONOMICS/AGGREGATE-SUPPLY-DEMAND.ASP

THERE ARE TWO TYPES OF CURVES THAT DEFINES THE AGGREGATE SUPPLY SHORT-RUN AGGREGATE SUPPLY (SRAS) FOR ON ORGANIZATION TO INCREASE ITS PRODUCTIVITY WITHOUT HAVING TO DO IT ALL FROM THE START, AND SECOND IS LONG-RUN AGGREGATE (LRAS) THAT IS USED FOR INVESTING IN SOMETHING IN SOMETHING NEW SETTING UP THE STRUCTURE.

THE SRAS CURVE IS POSITIVELY SLOPED AND DEFINES THE ONE-TO-ONE RATIO BETWEEN THE PRICE LEVEL AND REAL PRODUCTION, WHEREAS THE LRAS INDICATING THAT THE REAL PRODUCTION IS PRODUCTION IS INDEPENDENT OF THE PRICE LEVEL. WHEN THESE CURVES ARE CONSTRUCTED THE DETERMINANTS OF THE AGGREGATE SUPPLY ARE ASSUMED CONSTANT. THESE DETERMINANTS CAN HAVE A DIRECT EFFECT ON BOTH THE CURVES OR ON ONE DEPENDING ON THE ON THE DETERMINANT FOR EXAMPLE FLOW OF NET INVESTMENT THAT YIELDS PRODUCTIVITY WILL EFFECT BOTH OF THEM AND CAUSE THE AGGREGATE SUPPLY OF SHIFT RIGHT.

WHEREAS THE HURDLES IN RAW MATERIALS ON TEMPORARY BASIS DUE TO EITHER CONDITIONS OR DELAYS DUE TO TRAFFIC THAT EFFECTS THE PRODUCTION EFFECTS THE SRAS WHEREAS THE LRAS WILL REMAIN CONSTANT. ALSO ON THE BASIS OF CHANGES IN THE EXPECTATIONS OF THE INFLATION, SRAS MIGHT SHIFT TO THE LEFT IF THE PRODUCERS BELIEVE THAT THEY CAN SELL IT IN THE FUTURE FOR MORE PROFITS NOT EFFECTING THE LRAS. AGGREGATE “EMPLOYEES”, IT IS A PERSON OR A GROUP OF PERSONS EMPLOYED FOR WAGES OR SALARY AT AN ORGANIZATION, ESPECIALLY AT NO-EXECUTIVE LEVEL.

NUMBER OF EMPLOYEES AND THEIR WAGES PLAY AN IMPORTANT ROLE IN DETERMINING THE AGGREGATE SUPPLY OF A NATION. LET’S START BY CONSIDERING A FACT THAT AGGREGATE SUPPLY WILL INCREASE WITH THE ABILITY TO PRODUCE MORE BY THE PRODUCERS, SO THUS HAVING LARGE NUMBER OF EMPLOYEES.