Question

How does an improvement in production technology influence the supply curve of a firm?

What is the impact of the level of technology on supply?

Explain the effect of improved technology on the supply curve of a commodity.

How will an improvement in production technology affect the supply curve of a commodity?

Answer 1

Improvement in technique of production reduces the cost of production. Consequently, profits tend to increase, inducing an increase in supply and the supply curve shifts to the right.

Technological advancement → Cost ↓, → Profit ↑ → Supply ↑ → Rightward shift

Answer 2

An improvement in production technology will cause the supply curve of a commodity to shift to the right (from S to S₁).

• Lower Cost of Production: Advanced technology increases efficiency and reduces the per-unit cost of production for firms.
• Increased Supply: Because it becomes cheaper and faster to produce the commodity, producers are willing and able to offer a larger quantity for sale at every given market price.