How does a price level affect aggregate supply?
1 Answer
Jul 3, 2015
producers want high prices to be rich, consumers want lower prices to afford and save.
Explanation:
the producers fall under the supply side of the economy, if the price of bread increases, the increase will attract other suppliers to sell such a commodity, therefore increasing the number suppliers or producers thus the aggregate (average) supply.
If the price falls, it will cause many producers to run on a loss as the selling price is decreased without a decrease in the cost price, thus causing a massive exit of producers within the market/industry, therefore, the decrease of suppliers/producers will cause a decreased aggregate (average) supply.
