Refer to Figure 26-1. Which of the following events would shift the supply curve from S1 to S2?

• A. A technological improvement in production
• B. An increase in the price of a substitute good
• C. A decrease in the number of sellers in the market
• D. An increase in the cost of raw materials

Answer: (A)

Verified step by step guidance

1. Understand that a supply curve shows the relationship between the price of a good and the quantity supplied, holding other factors constant.
2. Recognize that a shift from supply curve S1 to S2 means the entire supply curve moves either to the right (increase in supply) or to the left (decrease in supply), not just a movement along the curve.
3. Identify factors that cause the supply curve to shift: changes in technology, input prices, number of sellers, or prices of related goods.
4. Analyze each option: a technological improvement typically lowers production costs, increasing supply and shifting the curve to the right; an increase in the price of a substitute good affects demand more than supply; a decrease in the number of sellers reduces supply, shifting the curve left; an increase in raw material costs raises production costs, shifting supply left.
5. Conclude that the event causing the supply curve to shift from S1 to S2 (assuming S2 is to the right of S1) is the technological improvement in production, as it increases supply by making production more efficient.