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 $OP_0$ and the quantity rises from $OQ$ to $OQ_1$.
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 $OP_0$ and the quantity rises from $OQ$ to $OQ_1$.
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
Explain what happens to the profits in the long run if the firms are free to enter the industry.
Complete the following schedule:
| Units Produced | TP (in ₹) | AP (in ₹) | MP (in ₹) |
| 1 | 100 | - | - |
| 2 | - | - | 140 |
| 3 | - | 140 | - |
| 4 | 480 | - | - |
'Law of Demand is price demand'. Comment.
What price, a consumer is ready to pay for a commodity in state of equilibrium?
A firm can sell as many units of a good as it wants to sell at a given price. Prepare a schedule showing Total Revenue, Average Revenue and Marginal Revenue of such a firm.
Explain the effect of increase in income of the consumer on the demand for a good.
Explain any two causes of ‘increase’ in demand of a commodity.
What is meant by inelastic demand? Compare it with perfectly inelastic demand.
Ms Pratima was hungry, hence she decided to eat bananas, however, after eating 2 bananas, she suddenly realised that, now she is not enjoying eating any further unit. Hence, she decided to eat rest of the bananas later on. Identify the reason behind the above case. Also. state the underlying assumptions.
Price Elasticity of Demand of a good is (-) 0.75. Calculate the percentage fall in its price that will result in 15% rise in its demand.