Technological change, population and economic growth Flashcards
what was malthus’ theory
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
what was malthus’ theory squashed by
the industrial revolution where advances in technology raised productivity, allowing incomes and population to rise
ceteris paribus d
an analysis holding other things constant
incentives d
economic rewards or punishments, which influence the benefits and costs of alternative courses of action
relative prices d
price of one good or service, relative to another (usually expressed as a ratio)
economic rent d
payment or benefit received above and beyond what the individual would have received in the next best alternative
what could be some things that are assumed about the way a capitalist economic system promotes technological improvements
prices of inputs are same for all firms,
firms know technology use in other firms,
attitudes towards risk similar among firm owners
innovation rents d
profits in excess of economic profits that am innovator gets by introducing a new technology
economic rent equation
benefit from option taken - benefit from next best option
reservation option d
a person’s next best alternative to a particular transaction
what is the simple decision rule that economic rent gives us
if action A would give you an economic rent: do it,
if you are already doing action A: carry on doing it
what is a technology that uses a lot of labour called
labour-intensive technology
dominated d
technology that produces same amount at lower cost than alternative technologies
how do you work out if one firm dominates another
draw line up and to the right of the point and see if any points are in that area
isocost line d
line along which all the combinations of two variables cost the same amount (workers and coal)
what shape are the isocost lines
downward sloping (like demand curve)
what is significant about the points above an isocost line
all points above the line are more expensive
if there are technologies above the isocost line will they be chosen over the one on the isocost line
no
what is simplified about the isocost line
assume that all fractions of the variables, however small, can be purchased
how do you compare technologies if the price of the factors increases (isocost lines)
draw new isocost lines at the different prices and compare
entrepreneur d
person who creates or is an early adopter of new technologies, organisational forms, and other opportunities for the purpose of creating value
what is creative destruction
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
who came up with creative destruction
Joseph Schumpeter
why is creative destruction creative
because it releases labour and capital goods for use in new combinations
before the industrial revolution technology was _____-_____, while the new technology was_____ _____-_____
labour-intensive,
capital goods-intensive
labour-intensive d
making greater use of labour as an input in production as compared with machines and other inputs
capital-intensive d
making greater use of capital goods (machinery and equipment) as compared with labour and other inputs
what was the difference between the cost of wages relative to capital goods in England and France (since mid 17th century)
in England workers became steadily more expensive relative to capital goods (incentive to replace workers stronger in England)
what is one explanation for the timing and location of the industrial revolution
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
factors of production d
resources used in a production process, typically labour, machinery and equipment (capital) and land
average product d
total output divided by a selected input (ex total output divided by number of workers)
production function d
amount of output that will result for one or more combinations of input. the function describes differing technologies capable of producing the same thing
what are two things we notice from the grain production function
labour combined with land is productive,
as more farmers work the land, the average product of labour falls
diminishing average product of labour d
situation in which, as more labour is used in a given production process, the average product of that labour typically falls
what are the two ideas central to Malthus’ model
the law of diminishing average product of labour.
population expands if living standards increase
subsistence level d
level of consumption such that population will not grow
what were the economic effects of the bubonic plague (1349-1351)
increase in average productivity,
farmers who owned their land were better off,
higher wages were offered in cities
why is the Malthusian model no longer a reasonable description of the world
the permanent technological revolution
what are the two influences on wages
how much is produced ,
the share going to the workers (depends on bargaining power)
