Difference Between A Movement Along The Supply And A Shift Of The Entire Supply Curve

1703 WordsNov 9, 20157 Pages
1.) Distinguish between a movement along the aggregate supply and a shift of the entire supply curve. What factors cause each to occur? Answer: There is a major difference between a shift of the aggregate supply curve and a movement along the curve. A shift of the curve can be caused by a number of factors. These factors include the nominal wage rate, prices of other input goods, technology, productivity, and available supplies of labor and capital. A movement along the aggregate supply is caused by a change in price level. The nominal wage rate causes a shift of the aggregate supply curve because higher wages for employees means a lower profit for the company. Since the profit would decrease the company would cut back on production which leads to lower aggregate quantity supplied at any given price level, causing the curve to shift to the left. The second factor that causes aggregate supply curve to shift is the price of inputs. If the price of an input used to produce a product increases, it will cause the producer to produce less at any given price because they are making less of a profit. The third factor that would cause the aggregate supply to shift is technology and productivity. If people can work faster and more efficiently it will decrease the cost of production, and vice versa. If people work faster it will cause the curve to shift because people are making the same amount but at a lower cost. This leads to the company benefitting and an increase in aggregate

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