Question

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

Hint:

Technological progress increases supply by making production more efficient and reducing costs, which shifts the supply curve to the right.

Answer 1

Step 1: Defining Technological Progress:
Technological progress refers to improvements in the methods or processes used to produce goods and services. It involves the development of new technologies, processes, or techniques that allow firms to produce more efficiently.
Step 2: Impact of Technological Progress on Supply:
Technological progress increases the productivity of a firm, allowing it to produce more output with the same amount of resources or inputs. This can lead to a decrease in production costs and an increase in the quantity of goods supplied at every price level. As a result, technological progress shifts the supply curve to the right.
Step 3: Examples of Technological Progress Impacting Supply:
- Improved Production Methods: A firm may develop new machinery or more efficient methods that allow it to produce more goods at a lower cost. This results in an increase in supply.
- Automation: The introduction of automation in the manufacturing process can significantly increase the output of a firm, leading to a greater supply of goods.
Step 4: Final Conclusion:
Technological progress is a crucial determinant of supply because it reduces production costs, increases efficiency, and enables firms to produce more goods at a lower cost, thereby increasing supply in the market.