Technological change

Question 1

define invention

Answer 1

creation of a new idea without it necessarily becoming a commercial reality]= a creation of a product for the first time

Question 2

define innovation

Answer 2

transforming an invention into a commercial reality

Question 3

how does tech change affect COP

Answer 3

• tech will decrease COP for firms in LR= cause supply to shift outwards and lower LRAC curve
• high tech in industries will increase specialist machinery in production process
  = increase tech EoS= lower LRAC
• production processes can be broken down into production lines per piece of machinery
  = increase division of labour and specialisation
  = increase LR productivity
• MES can occur @ higher output
  = better exploitation of EoS across higher output

Question 4

how does tech affect efficiency

Answer 4

• high productive efficiency
  = lower AC and LRAC= decrease MES point
• allocative efficiency gains depend on if low AC is passed onto consumer through lower price
• tech improvements will increase profits due to low AC in long run
  = increase dynamic efficiency gains
  = new products= increase choice for consumers

Question 5

how does tech affect market structures

Answer 5

• can decrease barriers to entry as firms don’t need physical shops= can set up online shops= reduce sunk and start up costs
• lower barriers would increase number of firms in market
  = increase comp= lower prices= more productive
• tech change will increase variety of goods
  = decrease product homogeneity
• would increase knowledge of consumers and firms as they can access info through internet
• can use online advertising and social media to reduce barriers of entry like brandy loyalty and heavy advertising