How do economies of scale affect the position of the supply curve in a market?

Economies of scale refer to the cost advantages that businesses experience when they increase their production. As a company produces more goods, the average cost per unit often decreases because fixed costs, like rent or machinery, are spread over more items. This reduction in cost can lead to a lower supply price, causing the supply curve to shift to the right. For example, if a factory can produce 1,000 toys for $10 each but can produce 10,000 toys for $8 each, the lower cost encourages more production at a lower price, which increases supply in the market. Therefore, as businesses achieve economies of scale, they can supply more goods at lower prices, changing the overall market dynamics.