Question
How does a cost saving technological progress affect market price and the quantity exchanged of a commodity? Use diagram.
✓
Answer
A cost saving technological progress reduces unit cost of production of a commodity. This will cause an increase in the supply of a commodity and lead to a rightward shift of the supply curve as shown in the diagram given. The demand curve of the commodity remaining the same, this will cause the market price of the commodity to fall and the equilibrium quantity to rise.
It is clear from the diagram that as a result of increase in supply, the supply curve shifts rightwards. As a result the price falls from OP to OP0 and the quantity rises from OQ to OQ1.
It is clear from the diagram that as a result of increase in supply, the supply curve shifts rightwards. As a result the price falls from OP to OP0 and the quantity rises from OQ to OQ1.
Need a full question paper?
Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.
Explore more
Similar questions
Discuss the subject matter of economics.
Distinguish between final goods and intermediate goods. Give an example of each.
If the Real GDP is Rs. 400 and Nominal GDP is Rs. 450, Calculate the Price Index (base = 100).
Giving reasons classify the following into explicit costs and implicit costs.
- Salaries of employees/ managers
- Expenditure on purchase of raw materials
- Rent paid for hiring building/ shop
- Interest paid on borrowed money
- Estimated rent of owner's own building
- Estimated interest on capital/savings invested by the owner himself.
Suppose all the customers of a commercial bank demand for their deposits at the same time then how does central bank help to commercial bank in this situation.
Give meanings of capital receipts and revenue receipts with an example of each.
How will a change in price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity also through a diagram.
What do the long run marginal cost and the average cost curves look like?
Give the meaning of average propensity to save and average propensity to consume. Can the value of average propensity to save be negative? If yes, when?
Explain the meaning of investment multiplier. What can be its minimum value and why?