AP MacroeconomicsAggregate Demand & Supply
Determinants of Aggregate Supply
The determinants of aggregate supply are non-price factors—input prices, productivity, taxes/subsidies on producers, and expectations—that shift the SRAS curve.
SRAS shifts when something other than the price level changes firms' per-unit production costs. Falling input/resource prices (e.g., cheaper oil or lower nominal wages) and rising productivity shift SRAS right, lowering the price level and raising output; supply shocks like a spike in energy prices shift it left, causing cost-push inflation. Business taxes and regulation also shift SRAS, while changes that raise the economy's productive capacity shift both SRAS and LRAS. Distinguish a shift of SRAS (a determinant changed) from a movement along it (the price level changed).