Distinguish Between a Movement Along the Aggregate Supply Curve and a Shift

question 107

Essay

Distinguish between a movement along the aggregate supply curve and a shift of the entire aggregate supply curve.What factors cause each to occur?

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Definitions:

Operating Leverage (DOL)

A financial metric indicating the proportion of fixed versus variable costs a company has, which affects its earnings before interest and taxes (EBIT) for every percentage change in sales.

Variable Cost

Costs that vary directly with the level of production or volume of output.

Fixed Costs

Constant expenses that do not change in relation to the level of production or sales.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the degree to which a firm can increase its profits by increasing sales.