Why does the short-run aggregate supply curve slope upward?
A) because quantity supplied increases when cost per unit falls
B) because quantity supplied decreases when cost per unit falls
C) because quantity supplied increases when the price level increases
D) because quantity supplied increases when GDP decreases

Question

Why does the short-run aggregate supply curve slope upward?  
A) because quantity supplied increases when cost per unit falls 
B) because quantity supplied decreases when cost per unit falls 
C) because quantity supplied increases when the price level increases 
D) because quantity supplied increases when GDP decreases

Quizplus · Accepted Answer

The short-run aggregate supply curve slopes upward due to the sticky wages and prices in the short run. When the price level increases, the output price increases faster than the input price, leading to the increase in the profit margin of firms, which, in turn, induces them to increase the quantity supplied.

Why Does the Short-Run Aggregate Supply Curve Slope Upward