Ecos Question (1 Viewer)

[edwardmiller]

How can an increase in aggregate supply be affected by labour? I dont understand because the components of aggregate supply are consumption, taxation and savings? yet in a number of multis from the past they give labour as a reason

 

[AzzA0608]

You have AS confused with AD

The formula for AD is C+I+G+(X-M) where C= cosumption, I = investment G = Govt.expenditure, X = exports and M = imports....

 

[edwardmiller]

nar i know what AD is.

Well what is aggregate supply then?

 

[arjiparji]

no azza u schmat.. he means AS not AD.

 

[ComingUpForAir]

How can an increase in aggregate supply be affected by labour? I dont understand because the components of aggregate supply are consumption, taxation and savings? yet in a number of multis from the past they give labour as a reason

Your question does not make sense..

 

[wantingtoknow]

What other choices were there? Perhaps labour was the most suitable answer to the question?

I guess it makes sense though. Labour can contribute to the increase in AS because increase in labour = increase in income (possibly) = increase in spending+saving, which are components of AS, and therefore, will lead to an increase in AS, I think?

 

[ComingUpForAir]

What other choices were there? Perhaps labour was the most suitable answer to the question?

I guess it makes sense though. Labour can contribute to the increase in AS because increase in labour = increase in income (possibly) = increase in spending+saving, which are components of AS, and therefore, will lead to an increase in AS, I think?

assuming firms are profit maximizing, an increase in labor would only happen due to decrease in the real wage (or an increase in labor will decrease the real wage) ..
total real income of workers=(real wage) x number of workers
you would have to show that the percentage increase in the number of workers raises more than the absolute percentage decrease in the real wage.

 

[edwardmiller]

yeah I didn't think the question made sense either. I think both your suggestions are probably the best answers.

Thanks for the help

 

[arjiparji]

svvviiinctor

 

[we0426]

How can an increase in aggregate supply be affected by labour? I dont understand because the components of aggregate supply are consumption, taxation and savings? yet in a number of multis from the past they give labour as a reason

no u have to look at the question in terms of policy..u see labour is in supply side economics ther fore it effects supply side economics..microeconomic

i thank 90 % sure..

 

[alex1992]

the question is indeed correct.

you must understand, that labour has a profound impact on all the components of aggregate supply.

this, however is simplistic, for labour is infact the core component of the gargantuan mechanism that is an economy.

if you adopt a keynesian/ thought of mind, you should indeed be able to understand the nature of this basic question.