Technological change

Question 1

What is the difference between invention and innovation?

Answer 1

Invention: The creation of something entirely new, such as a novel technology, material, or process

Innovation: The application of an invention to develop a product or service that adds value in the marketplace

Example: The development of the internet was an invention; the creation of the World Wide Web is an innovation that made the internet accessible and useful to the public. 

Question 2

How can technological change affect methods of production, productivity, efficiency, and firms’ costs of production?

Answer 2

1)Methods of Production: Introduce new processes or machinery that alter how goods are produced
2)Productivity: Enhance output per unit of input, leading to higher productivity
3)Efficiency: Reduce waste and optimize resource use, improving overall efficiency.
4)Costs of Production: Lower production costs by streamlining operations and reducing the need for manual labour

Question 3

How can technological change lead to the development of new products, the development of new markets, and may destroy existing markets?

Answer 3

1)New Products: Enable the creation of innovative goods and services that meet previously unmet needs
2)New Markets: Open up opportunities in sectors or regions that were previously inaccessible
3)Destruction of Existing Markets (creative destruction) Render existing products or services obsolete, leading to market decline

Question 4

How can technological change influence the structure of markets?

Answer 4

1)Market Entry: Lower barriers to entry, allowing new firms to compete
2)Market Exit: Cause firms unable to adapt to technological changes to exit the market
3)Market Concentration: Lead to monopolies or oligopolies if a few firms dominate due to technological advantages

Example: The rise of e-commerce platforms has transformed the retail market, leading to the closure of many brick-and-mortar stores and the emergence of online retail giants.