If Costs Increase, What Happens to the Aggregate Supply Curve

question 44

Multiple Choice

If costs increase, what happens to the aggregate supply curve?

• A) It shifts rightward.
• B) It shifts leftward.
• C) Prices move up along the curve.
• D) Prices move down along the curve.
• E) There is no change.

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Definitions:

Cobb-Douglas Utility Function

A form of utility function that represents preferences of consumers for various goods, showcasing how they allocate their spending based on the utility derived from each good, typically in the form of \(U(x,y) = x^a y^b\) where \(x\) and \(y\) are quantities of goods and \(a\) and \(b\) are positive constants.

Inverse Demand Function

A mathematical function that expresses price as a function of quantity demanded, illustrating how the price necessary to sell a given quantity changes.

Price

The amount of money required to purchase a good or service, often determined by supply and demand dynamics in the market.

Income

Funds accumulated over time from work or investing efforts, usually received systematically.