Question

Explain how technological progress is a determinant of supply of a good by a firm.

Answer 1

When there is the advancement in technology, the cost of production falls and there is an increase in profit. It leads to an increase in the supply of good which shifts the supply curve
towards the right.

The above diagram shows that the advancement in technology shifts the supply curve S towards the right from S to S₁ and the increase in the supply of good from OQ to OQ₁. However, the price of the good at OP remains constant