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COMPARATIVE STATICS: The technique of comparing the equilibrium resulting from a change in a determinant with the equilibrium prior to the change. Comparative statics is the primary analytical technique used in the study of economics. A popular example of this technique is found in the study of markets. Comparative statics is used to analyze how the equilibrium price and equilibrium quantity are affected by changes in the demand and supply determinants, which are graphically represented by shifts of the respective demand or supply curves.

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AGGREGATE SUPPLY DECREASE, SHORT-RUN AGGREGATE MARKET

A shock to the short-run aggregate market caused by a decrease in aggregate supply, resulting in and illustrated by a leftward shift of the short-run aggregate supply curve. A decrease in aggregate supply in the short-run aggregate market results in an increase in the price level and a decrease in real production. The level of real production resulting from the shock can be greater or less than full-employment real production.

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