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A-Level Economics · SRAS shift left (cost-push inflation) diagram question

Which distance measures the RISE IN COSTS that shifted the curve — the vertical gap between SRAS1 and SRAS2 at the new output?

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The diagram

The answer

The distance M F. At Y₂, straight up from SRAS1 (M) to SRAS2 (F): a cost rise of 4. The price level only rose by 2 — consumers didn't absorb all of it. The SHIFT is vertical: measure it between the two supply curves at one output, M up to F — 4. The price level, read off the axis, only rose from 5 to 7 — because as prices rise the economy moves back along AD and output falls. Cost rise and price rise are different numbers, and the exam rewards knowing which is which.

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This is one of 6 questions on the sras shift left (cost-push inflation) diagram — every corner lettered, every wrong answer diagnosed.

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