Question

Assuming a downward-sloping demand curve, an improvement in production technology is predicted to lead to:

a) Higher prices and lower quantity
b) Lower prices and higher quantity
c) Higher prices and higher quantity
d) Lower prices and lower quantity

Answer 1

An improvement in production technology leads to lower prices and a higher quantity of goods supplied, due to an increased supply from the technological efficiency.

Step-by-step explanation:

Assuming a downward-sloping demand curve, an improvement in production technology is predicted to lead to lower prices and higher quantity. This is because an improvement in production technology typically reduces the cost of production, which leads to an increase in supply.

A rightward (or downward) shift in the supply curve signifies that firms are willing to supply more at every price. Therefore, the new equilibrium in the market will be at a lower price and a higher quantity, reflecting increased efficiency in production.