When workers' wages and other resource costs such as rent increase, what happens to the short-run aggregate supply curve?

When workers' wages and other resource costs such as rent increase, the short-run aggregate supply curve shifts left. This occurs because higher costs of production lead to decreased profitability for businesses, which in turn causes them to reduce the quantity of goods and services supplied at any given price level. As production becomes more expensive, firms may choose to decrease output rather than produce at a loss, resulting in a contraction of the supply in the short-run.

The leftward shift of the aggregate supply curve indicates that at the same price levels, the economy is producing less than before due to these increased input costs. This concept is central to understanding how increases in resource costs impact overall economic output and inflation dynamics.