Consider the following statements regarding the impact of a technological progress on market equilibrium: 1. Technological progress shifts the marginal cost curve downward. 2. The market supply curve shifts to the right. 3. The equilibrium price decreases and quantity increases. Which of the statements given above is/are correct?

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.

NCERT Class 12 Economics — Chapter 2: Market Equilibrium

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Consider the following statements regarding the impact of a technological progress on market equilibrium:

Technological progress shifts the marginal cost curve downward.
The market supply curve shifts to the right.
The equilibrium price decreases and quantity increases.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A2 and 3 only
B1 and 2 only
C1, 2 and 3
D2 only

Did you get this right?

Solution

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.

Your note

More from Chapter 2: Market Equilibrium

With reference to the demand for a normal good, consider the following statements: 1. An increase in consumers' income leads to a rightward shift in the market demand curve. 2. An increase in the number of consumers leads to a rightward shift in the market demand curve. 3. A rightward shift in demand, with supply constant, leads to a decrease in equilibrium price. Which of the statements given above is/are correct?

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Consider the following statements regarding Market Equilibrium in a perfectly competitive market: 1. An equilibrium is defined as a situation where the plans of all consumers and firms in the market match. 2. In equilibrium, the aggregate quantity that all firms wish to sell equals the quantity that all consumers wish to buy. 3. If the market supply is greater than market demand at a specific price, the market is said to be in a state of excess demand. Which of the statements given above is/are correct?

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Consider the following statements regarding the determination of equilibrium with a fixed number of firms: 1. If the prevailing price is lower than the equilibrium price, there will be excess supply in the market. 2. In a situation of excess demand, the market price tends to increase. 3. As price rises, quantity demanded falls and quantity supplied increases, moving the market towards equilibrium. Which of the statements given above is/are correct?

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With reference to the Labour Market, consider the following statements: 1. Households are the suppliers of labour, while the demand for labour comes from firms. 2. The demand curve for labour by a profit-maximising firm is upward sloping. 3. The wage rate is determined at the intersection of the demand and supply curves of labour. Which of the statements given above is/are correct?

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Consider the following statements regarding the Marginal Revenue Product of Labour (MRPL): 1. It is the extra cost incurred for employing the last unit of labour. 2. It is calculated as the product of Marginal Revenue and Marginal Product of labour. 3. For a perfectly competitive firm, the Marginal Revenue Product of Labour is equal to the Value of Marginal Product of Labour. Which of the statements given above is/are correct?

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The correct option is 1, 2 and 3.

Explanation

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.