Question

Q- ‘The dynamic world of the technologies is fast changing the nature of the goods and the ways to produce them.’ In the context of the above statement, explain the impact of technology on the long run cost and the elasticity of supply in your business over a period of time. Support your answer with an appropriate diagram.

Answer 1

Supply refers to the quantity of a good that the producer plans to sell in the market. Supply will be determined by factors such as price, the number of suppliers, the state of technology, government subsidies, weather conditions and the availability of workers to produce the good.

There are many factors that affect supply. And one of them is technology.

In this case, there is a fall in supply. The supply curve shifts to the left. This causes a higher price. The supply can shift to the left because

1.Fewer firms in the market

2. Bad weather (agriculture)

3. Higher taxes

4. Decline in productivity (workers work less hard.)

5. Degradation in technology.

1. More firms

2. Improved technology

3. Lower tax

4. Higher government subsidies

5. More firms enter the market.

Thus from the diagram it is very clear that degraded technology may lead to less supply and improved technology may lead to better supply.

And as in the matter of long run cost, better technology will lead to lower long term cost and degraded technology will lead to higher long term cost.

Whereas if we install updated technology then it is a one time cost but it will benefit in future.