Suppose there is an improvement in the technology used to produce good A. How will it affect the supply curve of good A?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → The supply curve will shift to the right.
Better technology lets the firm produce the same output with fewer inputs. Its marginal cost falls, so the supply curve, a part of the MC curve, shifts to the right. At any price, more is supplied.
NCERT (2026-27): “4.5.1 Technological Progress Suppose a firm uses two factors of production – say, capital and labour – to produce a certain good. Subsequent to an organisational innovation by the firm, the same levels of capital and labour now produce more units of output. Put differently, to produce a given level of output, the organisational innovation allows the firm to use fewer units of inputs. It is expected that this will lower the firm’s marginal cost at any level of output; that is, there is a rightward (or downward) shift of the MC curve. As the firm’s supply curve is essentially a segment of the MC curve, technological progress shifts the supply curve of the firm to the right. At any given market price, the firm now supplies more units of output.” |