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August 20, 2019, 01:51:08 pm

Author Topic: Aggregate Supply Affecting a nations Productive Capacity  (Read 173 times)  Share 

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Seamus Wong

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Aggregate Supply Affecting a nations Productive Capacity
« on: April 03, 2019, 06:45:47 pm »
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Hey,

could someone answer this question for me:

"Explain how a rise in the costs of production for firms or falling profits will likely affect a nations productive capacity"
Here's my answer: (I feel as if an element is missing from it)

An increase in the cost of production (i.e. increased costs associated with the employment of Natural, Capital and Labour resources) by firms decreases their productivity levels (i.e. the level of output gained for a given quantity of inputs) and hence their profits. This reduces the ability and willingness of firms to continue supplying given quantities of goods at given prices which in turn decreases the total level of Aggregate Supply, thus contracting the nations productive capacity.

Chelsea f.c.

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Re: Aggregate Supply Affecting a nations Productive Capacity
« Reply #1 on: April 03, 2019, 08:36:12 pm »
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Less productive captivity means less production means less goods means less GDP... Sorry weird question kinda stating obvious
Bachelor of Commerce (Honours) Finance - UoM - 2019
Bachelor of Commerce - Economics and Finance - UoM - 2015 - 2018
Diploma in Mathematical Sciences - Statistics and Stochastic Processes - UoM - 2015 - 2018

NomotivationF

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Re: Aggregate Supply Affecting a nations Productive Capacity
« Reply #2 on: April 03, 2019, 09:57:06 pm »
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Less productive captivity means less production means less goods means less GDP... Sorry weird question kinda stating obvious

That doesn't really answer the question at all I don't think.
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NomotivationF

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Re: Aggregate Supply Affecting a nations Productive Capacity
« Reply #3 on: April 03, 2019, 10:01:36 pm »
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Hey,

could someone answer this question for me:

"Explain how a rise in the costs of production for firms or falling profits will likely affect a nations productive capacity"
Here's my answer: (I feel as if an element is missing from it)

An increase in the cost of production (i.e. increased costs associated with the employment of Natural, Capital and Labour resources) by firms decreases their productivity levels (i.e. the level of output gained for a given quantity of inputs) and hence their profits. This reduces the ability and willingness of firms to continue supplying given quantities of goods at given prices which in turn decreases the total level of Aggregate Supply, thus contracting the nations productive capacity.

I think your answer is fine, especially since this sort of a question wouldn't be worth more than 2-3 marks. However I wouldn't say it contracts the nations productive capacity, I think reduced/decreases may be better, but I would just listen to ur teacher

My journey through VCE

2018 - Accounting [42], Further Maths [44]
2019 (Aims)- English [~37], Economics [~40], Psychology [~45], Maths methods [25+]
2020-2024 (Hopefully) - Bachelor of Commerce/Science @Monash

Seamus Wong

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Re: Aggregate Supply Affecting a nations Productive Capacity
« Reply #4 on: April 03, 2019, 10:08:55 pm »
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Thanks for the feedback. Yeah I see what you mean with employing the term 'contracts', since it links in with movements along the demand and supply curves and may cause some degree of confusion. I'll stick to reduce/decrease.