What is the cause of increase in supply?

The correct answer is Option 1: improvement in technology

 

• Advanced technology reduces production costs, increases efficiency, and allows firms to produce more with the same resources.
• This leads to a rightward shift in the supply curve, increasing supply.

Why Not Other Options?

❌ "When factor prices increase causing an increase in the cost of production" → Incorrect

• Higher production costs reduce supply, leading to a leftward shift in the supply curve.

❌ "When prices of competing goods increase" → Incorrect

• If the price of competing goods (substitutes) increases, firms might shift production to the higher-priced good, causing a decrease in supply of the original good.

❌ "Decrease in number of firms in the market" → Incorrect

• Fewer firms mean lower total supply, shifting the supply curve leftward.