Which of the following scenarios will shift a supply curve to the right?
A An increase in technology
B An increase in the price of another good that the firm could produce
C An increase in the price of the good itself
D An increase in wages
The correct answer and explanation is:
The correct answer is A: An increase in technology.
Explanation:
A shift in the supply curve occurs when a factor other than the price of the good itself changes, affecting the ability of producers to supply the good at various prices. A rightward shift of the supply curve indicates an increase in supply, meaning producers are willing and able to produce more of the good at each price.
A. An increase in technology leads to improved production efficiency. Technological advancements often result in lower production costs, higher productivity, or the creation of more efficient production processes. As a result, producers can supply more of the good at any given price, shifting the supply curve to the right. This is a key driver of long-term economic growth as it allows firms to expand output without increasing costs proportionately.
B. An increase in the price of another good that the firm could produce would cause a firm to reallocate resources away from the production of the original good toward the higher-priced good. This shift would lead to a decrease in the supply of the original good, shifting the supply curve to the left, not the right.
C. An increase in the price of the good itself would not shift the supply curve. Instead, it would lead to a movement along the supply curve. If the price of the good increases, producers will typically be willing to supply more of the good, but this is a movement along the curve, not a shift of the curve itself.
D. An increase in wages increases the cost of production for firms, as labor is an essential factor of production. Higher wages make it more expensive to produce goods, leading to a decrease in supply. This would shift the supply curve to the left, as producers would be less willing or able to produce the same amount at each price.
In summary, an increase in technology is the factor that causes a rightward shift in the supply curve by making production more efficient and reducing costs.