The Impact Of Technology On The Supply Curve

After you have worked through this section of the learning unit, you should be able to:

  • explain with the aid of a supply curve what happens to supply if technology changes

A technological advance that decreases the cost of production is an important factor that can influence the supply of a product. In this section, we take a closer look at the impact of technology on supply.

If, for example, a new type of deep fryer is designed that uses less electricity and less oil to fry the chicken pieces, it will mean that the cost of producing fried chicken pieces will be lower (i.e. less electricity and less oil will be used). Fried chicken producers will therefore be able to supply more fried chicken pieces than before at the same price.

In our supply curve for fried chicken pieces, the impact of technology is illustrated by a shift of the supply curve.

At each price, the quantity supplied is higher than before and the supply curve shifts to the right.