4.8 Technological Change

Question 1

What is technological change?

Answer 1

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

Question 2

What does technology do?

Answer 2

Helps solves problems that face human societies

Question 3

What does the development of technology lead to?

Answer 3

Completely new markets
Changes in marker structure
Destruction of old markets

Question 4

What are the two meanings of technical progress?

Answer 4

1.Technological change is fundamentally about increasing economic welfare and making people happier(value judgement context)

2. Applying scientific and engineering knowledge as it develops to produce goods that work better and are more efficient (regardless if they are good for society or not)

Question 5

What is invention?

Answer 5

Making something entirely new;something that did it exist before

Question 6

What is innovation?

Answer 6

Improvements on or makes a significant contribution to something that has already been invented
(Thereby turning the results of invention into a product)

Question 7

Why do many inventions fail to see the light of day?

Answer 7

Because they have no practical use

Question 8

What is important for the success of a firm, invention or innovation?

Answer 8

Innovation

Question 9

Why is the IPod and example of innovation?

Answer 9

Sony came up with music sharing devices first and apple added MP3 to it making an innovation

Question 10

The effect of technological change has an effect on economic performance. It affects…

Answer 10

-methods of production
-productivity
-efficiency
-firms cost of production

Question 11

How does technological change affect the methods of production?

Answer 11

Technology improving changes the methods of production

E.g computers now used to build cars

Question 12

How does technology change affect productivity?

Answer 12

-it usually increases labour productivity in the case of both mechanised and automated production methods

(However with automation production methods there is the potential for them to fail which can have bad consequences for e the NHS)

Question 13

How does technology change efficiency?

Answer 13

Improved both productive and dynamic efficiency though there are exceptions

By increasing productivity over time technological changes shift both short run and long run curves downwards

Question 14

What is productive efficiency?

Answer 14

When it is impossible to produce more of one good without producing less of another

Occurs when ATC is minimised for a firm

Question 15

What is dynamic efficiency?

Answer 15

Measures improve of productive efficiency in the long run

Question 16

How does technology changes improve the cost of production?

Answer 16

-improving productive and dynamic efficiency also reduces cost of production in the short and long run

Especially in the long run basics more can be invested in capital equipment and technology which they hope will decrease the cost of production

Question 17

What makes up the measure or economic performance?

Answer 17

-cost of production
-efficiency
-methods of production
-productivity

Question 18

What is a disruptive innovation?

Answer 18

An innovation that helps create a new market but in doing so disrupts and old market

-it often improves a product or a service in a way that the market did not initially expect

-it creates new goods and consumers which competes with the existing market

Question 19

What does creating new markets enable?

Answer 19

Offer better value and the competition leads to sustaining improvements

Question 20

What is one of the biggest patterns in business?

Answer 20

The failure of leading companies to stay at the top of their industries when technologies or markets change

Question 21

What doesn’t distrust a new market?

Answer 21

Sustaining innovation

Question 22

What is monopolistic competition “

Answer 22

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

Question 23

What is duopoly?

Answer 23

Two firms in the market

Question 24

When can improvements in technology lead to large firms dominating?

Answer 24

If technological change leads to capital indivisibilities which occur when a lot of capital equipment is needed to produce one good

(Small firms cannot compete in the market)

Question 25

What is creative destruction?

Answer 25

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

Question 26

What does creative destruction describe?

Answer 26

A process where economic growth occurs in the economy as a result of new innovations creating more economic value than that which has been destroyed (decline of the old technologies the innovations replace)

Question 27

What is creative destruction essential for?

Answer 27

The way free market and mixed market economies develop and change over time