Teaching the Short-Run Aggregate Supply Curve in Introductory Economics

31 Pages Posted: 22 Aug 2006

Date Written: July 8, 2006

Abstract

Consistency in the development and presentation of the aggregate demand-aggregate supply model in introductory economics is crucial. Logical consistency requires drawing on the underlying microeconomic fundamentals, especially for distinguishing between 'movements along' and 'shifts in' the short-run aggregate supply curve. Empirical consistency requires accounting for observed changes in real national output and the aggregate price level, for example, the absence of deflation over the past half-century for the U.S. economy. The conventional treatment of aggregate supply typically found in economic principles texts is criticized and a case is made for dropping the long-run aggregate supply curve in favor of a more dynamic analysis based on chronological time. A simple linear aggregate demand-aggregate supply model is offered for explaining both rigorously and intuitively the annual behavior of an economy.

JEL Classification: A22, E10

Suggested Citation

Hess, Peter N., Teaching the Short-Run Aggregate Supply Curve in Introductory Economics (July 8, 2006). Available at SSRN: https://ssrn.com/abstract=925576 or http://dx.doi.org/10.2139/ssrn.925576

Peter N. Hess (Contact Author)

Davidson College - Economics ( email )

Box 6958
Davidson, NC 28035-6958
United States
704-894-2249 (Phone)
704-894-2874 (Fax)

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