Final answer:
As the push-pull boundary moves downstream, processing costs decrease and inventory carrying costs increase. This reflects a switch to a pull strategy, reducing overproduction but requiring larger finished goods inventories.
Step-by-step explanation:
When a push-pull boundary moves downstream, closer to the customer, this generally implies that the cost of processing decreases and the cost of carrying inventory increases. This is because when companies wait to produce products until customer demand is known (pull strategy), they minimize the risk of overproduction and reduce production-related costs. However, this may also require holding more finished goods inventory to respond quickly to customer demand, which increases inventory carrying costs.
An example of this could be considered in terms of technological improvements in production. Such improvements can decrease the marginal costs, which in turn pulls down the average costs of production. Conversely, if wages increase, this would represent an increase in costs of production. Firms may experience economic losses, leading to a shift in the supply curve and changes in market dynamics.