What are some factors that could cause supply (and the supply curve) to increase, and what impact would this have on the equilibrium price and quantity for the product?

Economics Dec 09, 2020

Expert Solution

One factor that could increase the supply of a good is an increase in total factor productivity (or technology). This improvement in efficiency increases the marginal product of inputs. Hence, at the same price, firms are willing to supply more. As a result, the supply curve shifts to the right (i.e., supply increases).

Holding the demand the same, the increase in supply will reduce the equilibrium price but increase the equilibrium quantity.

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