Both of these curves corresponds to short run then what assumption leads to first one and what leads to second one? For horizontal SRAS we say that in the short run when we have aggregate demand of output more than full employment level then firms supply the excess output at the same old price for short period (how do they do it? They have to pay extra wages for that excess work from the moment they start producing larger output so why would they charge the same price as this means that their profit margin has gone down). For positive sloped SRAS we derived the curve on the assumption that money wage was fixed outside the labour market so if now price goes down then MPL=W/P implies MPL goes up which implies higher employment which implies higher output produced. Now how is the second one related or different from the first one?


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