Answer to Question #219467 in Microeconomics for darily

Question

"Many manufacturers have been forced to cease semiconductor manufacturing because to the Covid-19 outbreak."

Identify if the above action changes/shift the aggregate supply curve in the short term or the aggregate demand curve in the short term, or even both. Use AD-AS to illustrate(draw a graph) and explain the effect of action that change/shift a curve.

Answer 1

The ceasing of semi conductor manufacturing means disruption in the supply chains and shortages.

Because there is no more semiconductor manufacturing, AS curve will shift to the left because there will be a negative supply shock. A lower quantity of real GDP will be produced at every price level. The shift in AS curve is as shown by the following graph: