The examples shown in Figure 12-1 and Table 12-1 are oversimplified in the sense that most new technologies require different mixes of inputs; not all other inputs are held constant. Measurement of total productivity gains due to research requires netting out the cost of any additional inputs employed with the improved technologies. The resulting
total net cost reduction per unit of output produced can then be used to summarize the total productivity effect. This total productivity effect is illustrated in Figure 12-2. New or improved technology shifts the original commodity supply curve (S1) downward to S2 because the supply curve is a marginal cost curve and the new technology has reduced the cost of production. The new lower cost of production per unit of output means that more output is produced at a lower price.This lower price is good for consumers of the product, but producers might be hurt.