2.5 Micro Flashcards
What is technological change?
Improving existing technologies and developing completely new technologies
What is invention?
The development of an idea into a new product or process
What is innovation?
Involves the creation of a market for the invention to make a profit
What is technological progress?
Occurs when technological change increases output for the same given factor inputs
What does technological change increase?
The number of firms in the industry
What would an increase in firms in the industry cause?
Reduce barriers to entry
Greater scope for competition
Reduces monopoly power, increasing the number of firms in the industry
What do high fixed costs lead to?
The requirement to produce significant output
Require increased scale of production in order to obtain MES
Thus creating barriers to entry and a tendency towards oligopolistic markets
What is the difference between innovation and invention?
Invention is the making of an entirely new product or process
Innovation is the creation of a market to allow the sale of this new invented product or process
What is destructive innovation?
New markets created that may destroy existing markets in the future e.g. AirBNB
What is sustainable innovation?
Develops existing markets
What are firms striving to create?
New production processes that lower AC and improve quality
New products to displace existing ones
Who are the winners and losers as firms innovate?
Old firms lose market share and might go bankrupt
Workers are displaced by machines and have to learn new skills
Those firms that are successful create new employment and profits
What is productive efficiency?
The level of output at which AC of production are minimised
What is dynamic efficiency?
The development of new products and more efficient processes that improve productive efficiency in the long run