1. SRAS holds the state of technology and factor productivity fixed, so only a change in production costs can shift it, leaving capacity for the long run.
2. A rise in costs shifts SRAS to the left and a fall in costs shifts it to the right, changing the output supplied at every price level.

Raw materials and energy

1. Higher prices of raw materials and energy raise firms' costs and shift SRAS left, because a spike in oil or gas prices feeds into production and transport costs across the whole economy.
2. Lower raw material and energy prices reduce costs and shift SRAS right, easing pressure on the price level.

Exchange rates and taxes

1. A weaker pound raises the price of imported inputs, so costs rise and SRAS shifts left, while a stronger pound makes them cheaper and shifts SRAS right; the fall in the pound after the 2016 referendum, for example, raised import costs for UK manufacturers reliant on foreign components.
2. Higher business tax rates raise firms' costs and shift SRAS left, whereas lower business taxes reduce costs and shift SRAS right.

Do cost shocks always cause lasting inflation?

1. It holds because a rise in costs shifts SRAS left, raising the average price level, as UK households saw when the 2022 energy shock fed through to prices.
2. But it depends on persistence: a one-off cost rise lifts the price level once, whereas lasting inflation needs the shock to continue or to trigger a wage-price spiral.
3. On balance the inflation effect depends on how long the cost shock lasts and on whether firms and workers expect it to continue.