Principles of Macroeconomics / Unit 8 MAC 0720 short lesson, about 20 seconds
The Three Zones
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The idea
The short-run supply curve has three zones: flat far to the left, near vertical at the right, and sloping in between.
In practice
In the flat zone demand decides output; in the vertical zone potential GDP does.
Where people slip
The zone decides what a demand shift accomplishes, which is why one policy can raise output here and only prices there.
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