We Know the Theories That Explain Why the Short-Run Aggregate-Supply

question 214

Essay

We know the theories that explain why the short-run aggregate-supply is upward sloping. But what determines how steep is the short-run aggregate-supply curve, and why is this important?

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Definitions:

Direct Materials Quantity Variance

A measure of the difference between the actual quantity of materials used in production and the expected quantity, based on standards.

Total Direct Materials Cost Variance

The difference between the actual costs of direct materials used in production and the expected (or standard) costs.

Direct Materials Price

The cost of raw materials and components required for the manufacture of a product.

Direct Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected quantity, multiplied by the standard cost per unit.