Micro Foundations · intro
What moves on the Supply & Demand diagram
A cost-reducing technology raises supply at every price, shifting the supply curve right and moving equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change. down along the demand curve to a lower price and higher quantity.
Supply reflects the cost of producing each unit.
A production breakthrough cuts the cost of making every unit.
Supply shifts right: firms will now offer more at any given price.
Price falls and quantity rises. Buyers gain here even though nothing about demand changed at all.
Examiners ask this as: new technology, cheaper production, supply increases, automation, lower costs.
Other scenarios on Supply & Demand