What effect does an increase in productivity have on supply?

An increase in productivity generally means that workers or producers are able to produce more outputs with the same amount of inputs, or they can produce the same amount with fewer inputs. This enhancement in efficiency allows companies to create goods or services at a lower overall cost per unit. As a result, these producers are more likely to increase the amount of goods they are willing and able to supply to the market at various price levels.

This relationship is crucial because increased supply typically leads to lower prices for consumers, assuming demand remains constant. Thus, an increase in productivity effectively shifts the supply curve to the right, indicating a greater quantity of goods is available in the market.

Other options suggest potential outcomes like a decrease in supply or no impact at all, which do not accurately reflect the positive correlation between productivity and supply levels. Indirect taxation, mentioned in one option, pertains to the effect of taxes on behaviors rather than the direct relationship between productivity and supply, making that choice unrelated to the question at hand.