Technological Change And Growth Flashcards
What can be attributed to the technological change?
The recent rapid and sustained increase of income and living standards
What has to be isolated to make an economic model?
The essential feature should be isolated, and everything else should be omitted from the model
What are economic models used for?
To see the overall picture of all people
When does equilibrium of a model occur?
When a situation is self-perpetuating
What does self-perpetuating mean in terms of an economic model?
A model is self-perpetuating if the object of interest does not change unless an external force is introduced that alters the situation in terms of the model’s view
What are the four features of a good model?
It is clear
It can predict accurately
It can improve communication
It is useful
Name one explanation as to why the industrial revolution happened in the UK?
Labour costs were relatively high, while local sources of energy were relatively cheap
What are the two things that technology can use?
Labour and energy
What does it mean when a technology 1 is dominated by technology 2?
Technology 1 uses more total inputs than technology 2, so technology 2 is cheaper to use regardless of which resource is more expensive
Why does a firms choice of technology depend on the economic information about the relative prices of inputs?
Firms aim to maximise profits, so they want to choose a technology that uses more of the cheaper input rather than a technology that uses more of the relatively expensive resource
What do isocost lines represent?
Combinations of inputs that give the same cost
What are the two beliefs of Malthus’ model?
Population expands is living standards increase
The law of diminishing average product of labour implies that as more people work, the more their income will fall
What are the two factors that have to remain constant for Malthus’ model to be considered relevant?
population and income
What is the predictions of Malthus’ model?
There will be a self-correcting response to new technology
In the long term, an increase in productivity will result in an increased population but not increased wages
