A manufacturer of bicycles notices that the price of bicycles is going up and therefore increases the number?

Question

A manufacturer of bicycles notices that the price of bicycles is going up and therefore increases the number of bicycles produced. But the manufacturer has failed to notice that all prices are increasing, including wages and the price of other inputs used in the production of bicycles.

6.2. This graph represents the short-run aggregate supply (SRAS). Eventually the bicycle manufacturer and producers of other goods and services recognize that all prices have increased, not just the price of the products they sell. This causes them to adjust upward their view of the expected price level. Show the effect of this on the short-run aggregate supply curve. Drag the curve to the appropriate position.

Will the curve **** to the right or to the left?

Answer 1

When costs go up for firms (many many firms) AS will shift left in the short run.

Answer 2

Where is the graph. The aggregate supply curve shifts to the left