Read the passage carefully and answer the question based on the passage:

Demand and Technology

Consider the case of a local coffee shop that faces rising demand for its products. In response to the increase in demand, the shop owner decided to increase the price of a cup of coffee. As a result, suppliers in the market respond by increasing their supply, hoping to capitalize on the higher price. If the coffee shop invests in a new espresso machine that makes coffee more efficiently, the cost of producing each cup decreases. This leads to an increase in supply and sell more coffee at the same or lower price, benefiting both the producers and consumers. This cost-reduction technology is helpful in the context of the real world.

Which of the following is an example of Cost-Reduction Technology in a business?

Implementation of a new machine that speeds up production.

The correct answer is Option (2) → Implementation of a new machine that speeds up production.

Implementation of a new machine that speeds up production: This directly addresses the concept of cost reduction through technology. A more efficient machine can produce goods faster, potentially with less labor, less waste, or lower energy consumption per unit. This reduces the cost of producing each unit, thus lowering overall production costs. This aligns perfectly with the idea of leveraging technology to improve efficiency and reduce expenses.

Why the other options are not examples of cost-reduction technology:

• Increased advertising cost: This is an increase in an expense, not a reduction. While it might lead to increased sales, it's not a cost-reduction strategy in itself.

• Raising prices to increase revenue: This is a pricing strategy aimed at increasing income, not a technological approach to reducing the cost of production. While higher revenue can lead to higher profits, it doesn't reduce the underlying costs.

• Hiring more employees to expand the business: This increases labor costs. While it's part of business expansion, it's not a cost-reduction strategy. In fact, if not managed efficiently, it can lead to higher per-unit costs.