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The theory of the firm under perfect competition — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsThe theory of the firm under perfect competition4 Marks
Question
Explain the effect of technological changes on the supply of a commodity.
✓

Answer

Technological changes affect the supply of a product by altering the cost of production. If there is an improvement in production technology used by the firm, the cost of production declines and consequently the firm would supply more than before at the given price. That is, the supply would increase implying that the supply curve would shift to the right.
On the other hand, if the firm uses primitive technology, the cost of production rises and consequently the firm would supply less than before at the given price. That is, the supply would decrease implying that the supply curve would shift to the left.

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