Question

1. Explain why the SAS curve slopes upward and the LAS curve is vertical.

Answer 1

SAS curve show different quantities if real output supplied at different price. there is a positive relation between price and quantity supplied .SAS curve is upward sloping because firms tend to increase price levels when demand increases and auction markets there are upward sloping supply curves .Sticky wage model and sticky price model are two theories to analyse the same.

LAS curve is vertical reflecting the fact that long run supply is not affected by changes in price level.It is  because economists believe that changes in demand cause only temporary changes in economy's total output.