Technological progress
Also called: Technical progress · Topic: Theory of the Firm, Supply and Perfect Competition · NCERT: Class 12, Ch 4 "The Theory of the Firm under Perfect Competition"
Meaning
Technological progress is an innovation that lets a firm produce more output with the same capital and labour. Put the other way, it lets the firm produce a given output with fewer inputs. The innovation can be a new machine or a better way of organising work, which NCERT calls organisational innovation. It lowers marginal cost (MC) at every level of output. Since a firm's supply curve is part of its MC curve, the supply curve shifts right, so the firm supplies more at every price.
Example
Suppose drip irrigation cuts water use by 40% and raises crop yield by 30%. The cost per unit falls, so the farmer supplies more at each price. If many farmers adopt it, market supply shifts right. Weather sensors and cold storage have a similar effect.
Don't confuse with
- Movement along the supply curve: this comes from a change in the good's own price. Technological progress shifts the whole curve.