Technological change, population and economic growth

Question 1

what was malthus’ theory

Answer 1

that a sustained increase in income per capita would be impossible, because even if technology improved, the growth of population would continue until living standards fell

Question 2

what was malthus’ theory squashed by

Answer 2

the industrial revolution where advances in technology raised productivity, allowing incomes and population to rise

Question 3

ceteris paribus d

Answer 3

an analysis holding other things constant

Question 4

incentives d

Answer 4

economic rewards or punishments, which influence the benefits and costs of alternative courses of action

Question 5

relative prices d

Answer 5

price of one good or service, relative to another (usually expressed as a ratio)

Question 6

economic rent d

Answer 6

payment or benefit received above and beyond what the individual would have received in the next best alternative

Question 7

what could be some things that are assumed about the way a capitalist economic system promotes technological improvements

Answer 7

prices of inputs are same for all firms,
firms know technology use in other firms,
attitudes towards risk similar among firm owners

Question 8

innovation rents d

Answer 8

profits in excess of economic profits that am innovator gets by introducing a new technology

Question 9

economic rent equation

Answer 9

benefit from option taken - benefit from next best option

Question 10

reservation option d

Answer 10

a person’s next best alternative to a particular transaction

Question 11

what is the simple decision rule that economic rent gives us

Answer 11

if action A would give you an economic rent: do it,

if you are already doing action A: carry on doing it

Question 12

what is a technology that uses a lot of labour called

Answer 12

labour-intensive technology

Question 13

dominated d

Answer 13

technology that produces same amount at lower cost than alternative technologies

Question 14

how do you work out if one firm dominates another

Answer 14

draw line up and to the right of the point and see if any points are in that area

Question 15

isocost line d

Answer 15

line along which all the combinations of two variables cost the same amount (workers and coal)

Question 16

what shape are the isocost lines

Answer 16

downward sloping (like demand curve)

Question 17

what is significant about the points above an isocost line

Answer 17

all points above the line are more expensive

Question 18

if there are technologies above the isocost line will they be chosen over the one on the isocost line

Answer 18

no

Question 19

what is simplified about the isocost line

Answer 19

assume that all fractions of the variables, however small, can be purchased

Question 20

how do you compare technologies if the price of the factors increases (isocost lines)

Answer 20

draw new isocost lines at the different prices and compare

Question 21

entrepreneur d

Answer 21

person who creates or is an early adopter of new technologies, organisational forms, and other opportunities for the purpose of creating value

Question 22

what is creative destruction

Answer 22

process by which old technologies and the firms that do not adapt are swept away by the new, because they cannot compete in the market

Question 23

who came up with creative destruction

Answer 23

Joseph Schumpeter

Question 24

why is creative destruction creative

Answer 24

because it releases labour and capital goods for use in new combinations

Question 25

before the industrial revolution technology was _____-_____, while the new technology was_____ _____-_____

Answer 25

labour-intensive,

capital goods-intensive

Question 26

labour-intensive d

Answer 26

making greater use of labour as an input in production as compared with machines and other inputs

Question 27

capital-intensive d

Answer 27

making greater use of capital goods (machinery and equipment) as compared with labour and other inputs

Question 28

what was the difference between the cost of wages relative to capital goods in England and France (since mid 17th century)

Answer 28

in England workers became steadily more expensive relative to capital goods (incentive to replace workers stronger in England)

Question 29

what is one explanation for the timing and location of the industrial revolution

Answer 29

wages relative to cost of energy and capital goods went up in 18th century in britain,
wages relative to cost of energy and capital goods higher in britain during 18th century than elsewhere

Question 30

factors of production d

Answer 30

resources used in a production process, typically labour, machinery and equipment (capital) and land

Question 31

average product d

Answer 31

total output divided by a selected input (ex total output divided by number of workers)

Question 32

production function d

Answer 32

amount of output that will result for one or more combinations of input. the function describes differing technologies capable of producing the same thing

Question 33

what are two things we notice from the grain production function

Answer 33

labour combined with land is productive,

as more farmers work the land, the average product of labour falls

Question 34

diminishing average product of labour d

Answer 34

situation in which, as more labour is used in a given production process, the average product of that labour typically falls

Question 35

what are the two ideas central to Malthus’ model

Answer 35

the law of diminishing average product of labour.

population expands if living standards increase

Question 36

subsistence level d

Answer 36

level of consumption such that population will not grow

Question 37

what were the economic effects of the bubonic plague (1349-1351)

Answer 37

increase in average productivity,
farmers who owned their land were better off,
higher wages were offered in cities

Question 38

why is the Malthusian model no longer a reasonable description of the world

Answer 38

the permanent technological revolution

Question 39

what are the two influences on wages

Answer 39

how much is produced ,

the share going to the workers (depends on bargaining power)