Use the following to answer questions: Figure: Demand, Supply Shifts -(Figure: Demand, Supply Shifts) In the figure, the initial demand curve is D₁ and the initial supply curve is S₁. If technological innovations lower the costs of production, what will happen? A) D₁will shift to D₃and equilibrium price and equilibrium quantity will increase. B) S₁will shift to S₂ and equilibrium price will increase but equilibrium quantity will decrease. C) D₁will shift to D₂ and equilibrium price and equilibrium quantity will decrease. D) S₁ will shift to S₃ and equilibrium price will decrease but equilibrium quantity will increase.

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Technological innovations that lower production costs typically cause the supply curve to shift to the right (from S₁ to S₃), leading to a decrease in equilibrium price and an increase in equilibrium quantity.

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