The correct option is 1, 2 and 3.
Explanation
In microeconomics, technological progress is a determinant of supply. It enhances production efficiency, allowing firms to produce output using fewer inputs or at a lower cost. This change fundamentally alters the cost structure of firms and, consequently, the market equilibrium.
Statement-wise Analysis:
- Statement 1 is Correct: Technological progress improves the efficiency of production factors. This reduction in input requirements for a given level of output lowers the cost of production. Consequently, the Marginal Cost (MC) curve, which represents the cost of producing an additional unit, shifts downward (or to the right).
- Statement 2 is Correct: In a market with a fixed number of firms (short run), the market supply curve is the horizontal summation of the individual marginal cost curves of all firms (above the average variable cost). Since the MC curves of individual firms shift downward/rightward due to lower costs, the aggregate market supply curve also shifts to the right. This indicates an increase in supply at every price level.
- Statement 3 is Correct: A rightward shift in the market supply curve, assuming a standard downward-sloping demand curve remains unchanged, creates excess supply at the original price. Market forces drive the price down to clear the market. The new equilibrium is established at a lower price and a higher quantity compared to the initial situation.
Key Takeaway:
Technological advancement reduces production costs, shifting the supply curve to the right. This results in a lower equilibrium price and a higher equilibrium quantity in the market.