Hi there!
The short-run aggregate supply curve can shift left (decrease) as a result of:
Increases in Input or Commodity Costs:
- Ex 1: If nominal wages increase, businesses will have to pay workers greater amounts of money, meaning that employing workers is more expensive.
- Ex 2: If the price of commodities go up (such as steel, oil, etc.), businesses will have to pay more to produce goods, decreasing supply.
Increase in government regulations:
- Ex 1: If government regulations are increased for limiting fossil fuel usage, many industries will experience a decrease in productivity, shifting the supply curve left.
Increase in business taxes:
- Ex 1: If the government increases taxes on businesses, businesses will have to divert money that could have been spent on materials, labor, etc. and pay government taxes. This results in a decrease in aggregate supply.
There are many other reasons for the SRAS curve to shift, but these are some of the main ones.
