Question

Explain the effect of technological progress on supply of a good.

Answer 1

A supply curve is a graphic presentation of the supply schedule showing the positive relationship between the market price of a good and the quantity supplied.

With advances in technology, the cost of production falls and the profit increases. This leads to an increase in the supply of a 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 OP remains constant