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Homework answers / question archive / Ceteris paribus, an improvement in production technology: - shifts the demand curve to the right, increasing both equilibrium price and output
Ceteris paribus, an improvement in production technology:
- shifts the demand curve to the right, increasing both equilibrium price and output.
- shifts the demand curve to the left, reducing both equilibrium price and output.
- shifts the supply curve to the right, reducing the equilibrium price and increasing equilibrium output.
- shifts the supply curve to the left, increasing the equilibrium price and reducing equilibrium output.
The correct option is: - shifts the supply curve to the right, reducing the equilibrium price and increasing equilibrium output.
There are several factors that affect the quantity supplied of a good or service, one of them being the production technology. An improvement in the production technology means that the firms will now be able to supply more and hence, the supply for their products will increase. An increase in the supply due to an advancement in the production technology is represented by a rightward shift in the supply curve.
An increase in supply will pull down the equilibrium price and increase the equilibrium output that is traded in the market.
