01Model
Build the economic model
SRAS reflects production at current capacity and input costs; LRAS represents sustainable productive potential. Different models emphasise spare capacity, wage-price adjustment and constraints differently.
For aggregate supply, state the relationship between sras and the relevant agents, then identify the ceteris-paribus conditions. The model is a disciplined simplification, not a complete description of reality.
- Define the central variables precisely.
- Identify the agents making decisions.
- State what is held constant and why that matters.
02Evidence
Apply evidence and data
Energy prices fall temporarily while skills investment could raise productive capacity over several years.
Application in aggregate supply means using scale, direction, timing and source to alter the argument. Explain how the evidence changes the mechanism instead of merely naming the context or copying a figure.
- Check units, dates and whether values are nominal or real.
- Separate correlation from a supported causal inference.
- Identify winners, losers and the appropriate counterfactual.
03Analyse
Develop the mechanism
Input cost change shifts SRAS → short-run price/output effects; resource, productivity or technology change shifts LRAS → sustainable capacity changes.
Carry this aggregate supply chain far enough to answer the question: identify the agent's response, the resulting market or macroeconomic change and why the outcome matters.
- Explain each arrow in the chain.
- Use the diagram or calculation in the written analysis.
- Distinguish short-run adjustment from longer-run response.
04Evaluate
Evaluate assumptions and magnitude
Time lags, skills mismatch, investment crowding and uncertain productivity effects make the size and timing of LRAS change uncertain.
Evaluation of aggregate supply should change confidence in the result. Test elasticity, time lags, scale, incentives, distribution and unintended effects rather than adding a generic “however”.
- Which assumption is most fragile?
- Would a different elasticity reverse or only weaken the result?
- What evidence could change the judgement?
05Judge
Reach an informed judgement
For aggregate supply, choose the argument with the greatest contextual importance and explain why it outweighs the alternative. State the conditions under which it holds rather than repeating the introduction.
The opportunity cost and distributional effect of sras matter. Political preferences may affect objectives, but the exam judgement must rest on transparent assumptions and evidence rather than ideology.
- Answer the exact command and scope.
- Rank the decisive factors.
- State a condition, timeframe and possible reason to revise the conclusion.
From theory to a testable claim
SRAS reflects production at current capacity and input costs; LRAS represents sustainable productive potential. Different models emphasise spare capacity, wage-price adjustment and constraints differently.
Applied taskEnergy prices fall temporarily while skills investment could raise productive capacity over several years.
Causal chain
Input cost change shifts SRAS → short-run price/output effects; resource, productivity or technology change shifts LRAS → sustainable capacity changes.
Applied taskRewrite the aggregate supply chain with one piece of numerical or contextual evidence at the link where it changes the expected magnitude.
Evaluation that does work
Time lags, skills mismatch, investment crowding and uncertain productivity effects make the size and timing of LRAS change uncertain.
Applied taskExplain whether this consideration weakens, delays, redistributes or reverses the predicted aggregate supply outcome.