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Ricardo A Level Economics (AQA) > 3.4.8 - Technological Change > Flashcards

3.4.8 - Technological Change Flashcards

1
Q

What is technological change?

A

A term used to describe the overall effect of invention, innovation and the diffusion or spread of technology in the economy.

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2
Q

What does technology focus on?

A

Making things happen.

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3
Q

What are the two distinct meanings of technical progress?

A

A normative or value-judgement context, it’s fundamentally about increasing economic welfare.

Applying scientific and engineering knowledge in order to produce goods that are more efficient and work better, irrespective of whether or not they are good for society.

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4
Q

What is an invention?

A

Making something entirely new; something that did not exist before or at all.

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5
Q

What is an innovation?

A

Improvement on or a significant contribution to something that has already been invented.

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6
Q

What is the link between invention and innovation?

A

Invention involves creating new ideas for products and innovation then converts those results into marketable products.

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7
Q

Is innovation or invention more important for a firm?

A

Innovation, as many inventions never see the light of day as they have no practical use.

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8
Q

How does Tom Grasty distinguish invention and innovation?

A

Invention can be defined as the creation of a product for the first time. Innovation occurs if someone improves on or makes a significant contribution to an existing product.

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9
Q

What is a good example of invention / innovation?

A

The microprocessor.

In and of itself, the microprocessor did nothing, but the innovation that followed allowed us to create computers.

The iPod.

Followed the Sony Walkman, but was leaps and strides better in terms of interaction, storage size etc. due to innovation.

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10
Q

Who is widely regarded as one of the best innovators of all time?

A

Steve Jobs.

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11
Q

What can technology change via diffusion into the economy?

A

Methods of Production
Productivity
Efficiency
Costs of Production

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12
Q

How does technology change Methods of Production?

A

In each section of history, there has been one major technological improvement that has led to a major change within production techniques.

In the mid-twentieth century, there was a major production change that coincided with automobiles.
In the 1940’s, computers were developed and led the change towards mechanisation.
In modern times, automated production has superseded mechanisation.

All of these technology improvements have led to less human interaction in the manufacturing process, therefore changing employment of the methods of production.

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13
Q

What is our age called?

A

The ‘Computer Age’

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14
Q

Why can our age be called the Computer Age?

A

Computers have permeated through all of society.

Manufacturing, Distribution, Consumer Goods.

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15
Q

How much will automation change labour employment?

A

Labour employment will fall as computers will control other machines, almost completely removing humans from the equation.

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16
Q

How has technological advancement changed productivity?

A

Technological advancement generally increases labour productivity as automation and computers work far more efficiently than a human could ever.

There are no wage costs and a minimal risk of error.

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17
Q

What do economists commonly mean when they refer to productivity?

A

Labour productivity.

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18
Q

Why may technological advancement hinder productivity?

A

There have been many well-publicised instances of organisations that have had very expensive systems fail to work properly and therefore have been scrapped.

The NHS is a prime example of this.

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19
Q

What is the public purse?

A

The funds raised by a government by taxation or other means.

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20
Q

What is productive efficiency?

A

For the economy on the whole, it is when it is impossible to produce one more of a good without reducing supply of another. (Think PPF)

For a firm it occurs when the average total cost of production is minimised.

21
Q

What is dynamic efficiency?

A

Measures improvements in productive efficiency that occur in the long run over time.

22
Q

What does productive efficiency centre upon?

A

Minimising average costs of production.

23
Q

What does dynamic efficiency measure?

A

The extent to which productive efficiency increases over time in the economic long run.

24
Q

How does dynamic efficiency occur?

A

The improvements in products and services, innovation and creative destruction.

25
Q

What does an improvement in dynamic and productive efficiency often mean?

A

Technological improvement.

26
Q

What happens by increasing productivity in terms of technological change?

A

Short-run and long-run cost curves are shifted downwards due to technological improvement.

This leads to costs falling, particularly in the long run as all factors of production are variable so firms can invest in capital equipment, leading to capital deepening and capital widening which likely leads to reduced costs of production.

27
Q

What is disruptive innovation?

A

An innovation that creates a new market but in doing so eventually disrupts an existing market.

28
Q

What is sustaining innovation?

A

An innovation that develops existing markets, enabling firms within to offer better value and compete against one another.

29
Q

What did Joseph L. Bower and Clayton M. Christensen think was the most consistent pattern in business?

A

The failure of leading companies to stay at the top of their industries around time of technological / market change.

30
Q

What is an example of Bower and Christensen’s theory?

A

Xerox losing out on the photocopier market to Canon.

31
Q

Explain Bower’s and Christensen’s theory?

A

Leading companies invest aggressively in technology necessary to retain current customers, but fail to make certain other technological investments that customers of the future will demand.

Companies that dominate an existing technology are in danger of disruptive innovation. Often, customers will reject the goods produced by a new technology as it does not address their needs as precisely.

32
Q

In what way have smartphones affected the market for digital cameras?

A

The demand for digital cameras has fallen rapidly due to smartphone cameras improving to the point at which an average consumer can no longer tell the difference.

33
Q

What is monopolistic competition?

A

A market structure in which firms have many competitors, but each one sells a slightly different product.

34
Q

What is a duopoly?

A

Two firms only in a market.

35
Q

Why are some markets more easily monopolised than others?

A

High entry costs of a market make it easier to monopolise as high entry barriers make it difficult for new companies to enter the market.

36
Q

How can technological change lead to monopolistic markets?

A

If the technological change leads to capital indivisibilities, it becomes incredibly difficult for new companies to enter the market as firms cannot feasibly use smaller units of capital and be within a market.

37
Q

What is an example of technological change leading to market dominance for a small group of firms?

A

The jumbo jet industry.

The American Boeing Corporation and the European Airbus consortium are the only two jumbo jet manufacturers.

38
Q

What is the jumbo jet industry an example of?

A

A duopoly.

39
Q

What is creative destruction?

A

Capitalism evolving and renewing itself over time through new technologies and innovations replacing older technologies and innovations.

40
Q

Who coined the term creative destruction?

A

Austrian economist Joseph Schumpeter.

41
Q

When was the term creative destruction coined?

A

1942.

42
Q

What is the dominant form of capitalist business enterprise in the UK?

A

PLCs.

43
Q

What is creative destruction strongly related to?

A

Technological change and innovation.

44
Q

What is creative destruction in practice?

A

New innovations creating more economic value than that being destroyed.

45
Q

What does creative destruction look like within society?

A

Creative destruction causes societies to grow more productive and richer, with it’s citizens benefiting from new and better products.

46
Q

What company is famous for causing disruptive innovation?

A

Apple.

47
Q

What company regularly partook in creative destruction?

A

Apple.

48
Q

What businesses were massively damaged due to Apple?

A

HP, Nokia and Blackberry.

49
Q

What affects the ways that firms operate?

A

Technological change.

Ricardo A Level Economics (AQA) (81 decks)

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