Causes of AS Shifts

1. Short-run shifts come from changes in the costs of production, so SRAS moves before capacity does.
2. Long-run shifts come from changes in productive capacity, so LRAS moves only when the economy can produce more.
3. A leftward shift means less supply at every price level; a rightward shift means more.

Shifts in SRAS

1. Money wage rates: a nationwide pay settlement of +6% raises unit labour costs, so SRAS shifts left.
2. Raw material and energy prices: an oil price jump raises input costs at every output, so SRAS shifts left.
3. The exchange rate: a depreciation raises the domestic price of imported inputs, so SRAS shifts left.
4. Indirect taxes and subsidies: a higher tax on production shifts SRAS left, while a new subsidy shifts it right.

Shifts in LRAS

1. The quantity of factors of production, such as net migration adding workers, expands capacity, so LRAS shifts right.
2. The quality of factors, raised by education and training, lifts productivity, so LRAS shifts right.
3. Technology and productivity let the same resources produce more output, so LRAS shifts right.
4. Investment in new capital enlarges the stock of productive equipment, so LRAS shifts right.

Keeping SRAS and LRAS Apart

1. A temporary cost change shifts SRAS but leaves LRAS unchanged, because capacity has not moved.
2. LRAS moves only when the quantity or quality of factors changes, so capacity itself must alter.
3. The two curves therefore respond to different triggers, so it depends on whether the shock hits costs or capacity.

Can we always tell whether an AS shift is short-run or long-run?

1. For most shocks the trigger reveals the horizon cleanly: a cost change such as an oil-price spike or a pay settlement shifts SRAS, while a change in the quantity or quality of factors shifts LRAS, so the categorisation is a reliable working guide.
2. But the line often blurs: investment lowers costs now, shifting SRAS right, and enlarges capacity later, shifting LRAS right, so a single cause moves both curves over different time frames.
3. A cost shock is also only temporary if it reverses: if a prolonged downturn destroys skills and scraps capital through hysteresis, what began as an SRAS shift hardens into a leftward LRAS shift, so the label depends on how long the shock lasts.
4. On balance the SRAS/LRAS split predicts real outcomes well for one-off cost shocks, but for investment-driven or long-lasting changes it depends on the time horizon and on whether the shock feeds through to capacity, so the safest approach is to state the horizon assumed rather than treat the two curves as watertight.