Which of the following statement (s) is/are correct?
Statement 1: An organisational innovation shifts the supply curve of the firm to the left.
Statement 2: An increase in the input prices causes a shift in the supply curve to the right.
Answer & explanation
Correct answer: option 4
The correct answer is Option 4: None of the given statement is correct.
Statement 1: Incorrect
- Organizational innovation (e.g., better management, improved logistics, or efficient work processes) generally reduces production costs and makes firms more efficient.
- A decrease in production costs allows firms to produce more at the same price, leading to a rightward shift in the supply curve.
- Since the statement says the supply curve shifts to the left, it is incorrect.
Statement 2: Incorrect
- An increase in input prices (e.g., higher wages, costlier raw materials) raises production costs, making production more expensive.
- As a result, firms reduce the quantity they are willing to supply at the same price, causing a leftward shift in the supply curve.
- Since the statement says the supply curve shifts to the right, it is incorrect.