8.2 The Very Long Run: Changes in Technology Flashcards
What changes dose improvements in available knowledge and resources affect LRAC curves.
In the very long run, however, there are improvements in available knowledge and resources. Such changes cause downward shifts in LRAC curves.
What is technological change?
Technological change refers to all changes in the available techniques of production.
What is the notion of productivity?
Output produced per unit of some input; is frequently used to refer to labor productivity, measured by total output divided by the amount of labor used.
What are two widely used measures of productivity?
Two widely used measures of productivity are output per worker and output per hour of work.
How does the search for profit take form in the very long run?
In the very long run, the search for profit takes the form not just of choosing the most efficient technique among known alternatives but also of inventing and innovating new products and processes.
What are the three aspects of technological change:
new techniques, improved inputs, and new products.
What is process innovation?
Throughout the nineteenth and twentieth centuries, changes in the techniques available for producing existing products have been dramatic; this is called process innovation.
What are two important aspects of technological improvement?
The invention of new production techniques and the development of new and better inputs are important aspects of technological improvement. They lead to reductions in firms’ costs and a downward shift in LRAC curve
What is a crucial part of the steady increase in living standards?
The development of new products is a crucial part of the steady increase in living standards.
How can firms be proactive?
Firms respond to market signals that indicate changes in the economic environment.
What can firms do in the face of increased prices of inputs?
Faced with increases in the price of an input, firms may either substitute away or innovate away from the input—or do both over different time horizons.
Over the very long run, what has the most important influence on costs of production and on material standards of living been?
Over the very long run, the most important influence on costs of production and on material standards of living has been increases in output made possible by technological improvements.
What kind of movement on the LRAC curve do technological improvements cause?
Technological improvements usually lead to downward shifts in firms’ LRAC curves.
Are changes in technology endogenous or exogenous responses to changing economic signals?
Changes in technology are often endogenous responses to changing economic signals; that is, they result from the firms’ responses to changes in the economic environment.
