Question

True or False. Draw a graph (supply and demand diagrams) to support your answer:

Technological innovation benefits society because it increases the total revenue of the producers.

Answer 1

Answer to the question:

Option: False.Technological innovation need not necessarily lead to an increase in the total revenue of the producers.
Explanation: Technical innovation shifts the supply curve to the right which lead to a areduction in the price level and an increase in the equilibrium quantity. The total revenue of the producers will increase or not depends on the priceelasticity of demand. If the price elasticity of demand is relatively more elastic than the total revenue will go up with an increas in the equilibrium quantity, otherwise it will not. The technical innovation increases the social welfare of the society since more goods are produced and more conseumers are able to purchase at lower price.

Refer to the following diagram:

Before Technical innovation:

Equilibrium point= E (AS1=AD)

Equilibrium price= P

Equilibrium output= M

Consumer surplus= PER

Producer surplus= PES

Total Surplus= CS+PS=PER+PES = SER

After Technical innovation:

Equilibrium point= G (AS2=AD)

Equilibrium price= T

Equilibrium output= N

Consumer surplus= TGR

Producer surplus= TGL

Total Surplus= CS+PS=TGR+TGL = LGR

We can, here, see that the technical progress shift the supply curve to the right causes the price to fall and the equilibrim output to go up. This has increased the producer surplus, consumer surplus and thus the total surplus.

(The diagram is prepared using MS word. Sorry for any improper finishing)