A firm producing electric vehicles, discovers a cheaper and more reliable source of battery power for its vehicles. How will the supply curve of the firm react to this development?

Supply curve will experience rightward shift

The correct answer is Option 1: Supply curve will experience rightward shift

When the firm discovers a cheaper and more reliable source of battery power, it reduces production costs. Lower production costs lead to:

1️⃣ Increased Profitability → Since it is now cheaper to produce each unit, the firm can produce and sell more vehicles at the same price.

2️⃣ Rightward Shift of the Supply Curve →

• Since production is more cost-efficient, the firm is willing to supply more at every price level.
• A rightward shift in the supply curve means higher supply at the same price or lower price for the same quantity.