I am a bit confused with the SRAS and LRAS curves. The book we use is the Pearson Baccalaureate and it tells me that LRAS curve is perfectly inelastic and vertical, and that SRAS is curved (elastic below FE and inelastic above FE). It contradicts my teacher who tells us that the SRAS is a straight line (like S curve in micro) and that LRAS is curved (elastic below FE and inelastic above FE). Which one of these theories is right for the IB exam??
IB Economics Aggregate supply Watch
- Thread Starter
- 27-03-2013 14:28
- 27-03-2013 14:34
SRAS is curved whereas LRAS is a perfectly inelastic vertical line.
- 28-03-2013 10:05
Draw your SRAS and AD curves as you would with a normal Supply & Demand Diagram (Just label them SRAS and AD respectively). Average Price as your Y-axis, Real output as your X-Axis. Your LRAS curve is a perfectly inelastic curve that goes right through the intersection point of SRAS and AD.