Question

Technical advancement leads to cost-saving. With the help of a diagram, explain the effect of technical advancement on the supply curve.

Answer 1

Technical advancement reduces the cost of production and increases profit margin, thereby inducing the producers to produce more and increase the supply, at a given price.

Thus, the supply curve shifts rightward from SS to S₁S₁ due to technical advancement. Quantity supplied increases by the amount Q₁Q₂.