1. Technological progress: The technological progress, for instance an organizational innovation by a firm, with same levels of capital and labour, leads to more production of output.

The technological progress or organizational innovation allows the firm to use fewer units of inputs. It is expected that this will lower the firm’s marginal cost at any level of output; that is, there will be shift of MC curve towards right from the original MC curve.

As the firm’s supply curve is the part of rising MC curve, technological progress shifts the supply curve of the firm to the right. At any given market price, the firm supplies more units of output.

2. Input prices: A change in input prices also affects a firm’s supply curve. If the price of an input increases, the cost of production rises. The consequent increase in the firm’s average cost at any level of output is usually accompanied by an increase in the firm’s marginal cost at any level of output. This means that the firm’s supply curve shifts to the left at any given market price and the firm now supplies fewer units of output.