Classical Aggregate Supply Aggregate Demand (AS/AD) Model - Short Run and Long Run - The classical model of Aggregate Supply and Aggregate Demand in both the short and long run with key assumptions and detailed analysis
Wowwwww.... superb explanation Dear Respected sir. Thank you sooooooooooooooooooooo much. You are amazing. I really really feel very comfortable with your video lessons.
sir, firstly your videos and explanation are amazing, I really really loved the way you have explained each and every topic, which has helped me for preparing for my AS Level examinations. I tried searching for some videos for the A level content, but the videos are limited. if u could make more videos on A level content, it will be really helpful for all the A level students.
+Chinar Bajaj Great to hear thanks! I have plenty of content covering A Level, have a flick through my A2 Micro and A2 Macro playlists. If there is something you still need let me know and I may make a video to cover it
SO could I be right in saying that the economy is fully utilising their resources at 3:51 and that the economy is at a point on the ppc. Also thanks for uploading these video's - they're great for revision!
personally , in my real economics paper I didn't use the classical model once , I found it limits the amount you can develop and eval compared to Keynesian LRAS
Hi, greetings from India! Great video, sir. Thanks a ton. Just one doubt. Here you have assumed that the LRAS stays fixed and all the changes happen through the SRAS. Can you please tell me why does the LRAS does not shift and under what circumstances will it shift, in case it ever does?
It's crazy how all these models are completely fucked when it comes to COVID. We're seeing high unemployment, high inflation, low economic output, low interest rates, low levels of production.
Hi, is it possible that when AD shifts to the left and price level go down, so purchasing power goes up, people buy more stuff and there is an extension in the AD without a shift in SRAS
Hiya sir. I just had a question: what would happen if the SRAS shifted first (because of lower raw material costs or lower wage rates) without any AD shift prior to it? Would the AD shift to push the market equilibrium back to the LRAS or would the LRAS shift to the right with the SRAS?
In this case, the long run impact will depend on whether those shocks are temporary or permanent. For example, suppose an increase in the price of oil leads to a negative supply shock, output goes down, but inflation and unemployment go up. The increase in unemployment will theoretically lead to lower wages (because their is less competition for labour, so firms do not have to compete for workers with higher wages). SRAS increases once wages have adjusted, because a decrease in the price of a input to production will lead to an increase in SRAS. Output returns to the full employment output. On the other hand, if a shock is permanent, there is an entirely different impact. Suppose that there is a permanent negative supply shock that makes the entire economy less productive, such as stricter regulations on production. The capacity of the economy has decreased, so LRAS shifts to the left. Because such regulations make the cost of production higher, SRAS will also decrease until output has returned to the full employment output. In this case, output is permanently lower and the price level permanently higher. Hope this helps
"all you see is that inflation increases" your videos on fiscal and monetary policy (or demand side policies) you say have twofold effects, initially boosting AD but potentially also AS in the long run too. If they are properly implemented, say the government uses interventionist policies on health care and education, will we not see a shift in the AS curve in the classical diagram?
I have to draw a curve and explain about factor that shift AS curves. I got the factor Incentives. I have no idea how to draw the curves and how to explain it. Can you help?
if sras shifts to the right then ad will shift to the left because wages become variable and workers will revise up their wage expectations, its the same as what happens with the long run Phillips curve.
@@grgfstr but if costs of production have decreased why would AD reduce? Say if the price of oil fell, so costs decrease what impact does that have on AD?
Sorry i meant if costs of productions increased, sras shifts leftwards. If the price of oil increased then firms would increase spending on that good. A increase in price is an indication of inflation, workers will realise the increase in inflation and therefore in the long run revise their wage upwards to match the increase in price level. This will increase AD as consumption will increase as consumers will have more disposable income.
Y can be used to mean Real GDP. So on the X-axis whenever you write GDP or more correctly, Real GDP, you can simply use Y at the bottom as a short cut :) Different people, teachers and economists label things differently and Y is a perfectly acceptable labeling for Real GDP.
+Taha Noman It's all about helping any economics students out there without the need for up front payment - if students feel like they want to contribute, I accept non-obligatory donations which go directly back into making new content
