chapter 3 - innovation Flashcards
competitive advantage
an edge over rivals
government failure
an economic inefficiency caused by government intervention
innovation
improving an existing idea
invention
coming up with a new original idea
market power
the ability of a company to set the price of its product profitability above the market rates without losing market share
merit goods
a good that is underconsumed in a free market
R and D investment
the stages of growth and decline a product experiences between being introduced to consumers and being discontinued
3 purposes of R and D is to search for…
- a new idea
- the development of an existing one
- a new of making or providing the products
3 factors of the design mix
function, aesthetics and cost
how can product innovation occur
- automation
- robotics
- LEAN production techniques
- total quality management
- training for staff
6 ways product innovation increases market power
- create a unique selling point by differentiating then from rival products
- increased brand loyalty
- enable premium pricing and so increase revenue from firms
- development of new products
- creates new markets
- May destroy existing markets
2 ways process innovation increases market power
- technological changes
- improved quality and quantity of goods and services produced
3 extension strategies
- adapt existing product by altering design
- develop new products
- find new markets for existing products
5 advantages of firms being efficient for the government
- growth
- employ staff
- pay higher wages
- pay taxes
- buy resources from other firms
3 problems of state funding for R and D
- the opportunity cost to the government
- firms could become inefficient if they rely on subsidies, since they have little incentive to lower their costs
- could lead to government failure if inefficient industries are subsidised
