CA Foundation · Business Economics · Theory of Demand and Supply
A textile mill in Surat adopts a new technology that lowers its cost of producing each metre of cloth. Other things remaining the same, what is the effect on the supply of cloth?
Better technology lowers production cost, so the mill can supply more cloth at every price. This is an increase in supply and shifts the supply curve to the right, rather than moving along the existing curve.
- AMovement up along the same supply curve
- BMovement down along the same supply curve
- CRightward shift of the supply curveCorrect
- DLeftward shift of the supply curve
Explanation
Improved technology reduces unit cost, so producers are willing to supply more at each price. This is an increase in supply, shown as a rightward shift. A movement along the curve would occur only if the product's own price changed.
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