Technology Population and Growth. Flashcards
What are we interested in and include when looking at economic models
We are interested in the incentives, the relative prices, economic rents and we include ceteris paribus.
What is an entrepreneur
It is a person or firm willing to try out new technologies or start new businesses. You can describe them as entrepreneurial.
How does cost reducing innovation raise profits for a firm?
By switching to a more efficient technology, the cost of producing drops. Hence, assuming, output stays the same and price remain unchanged, the fall in cost of producing is equal to the extra profit. If revenue also changes then the change in profit is equal to the change in revenue - change in cost. The extra profit is called an economic rent.
What were the incentives for new technologies in Britain.
The cost of coal and capital goods against the cost of labour gave an incentive for firms to act like entrepreneurs and adopt new technologies
What does an isocost line show
an isocost line shows all the combinations of costs that add up to a given total amount.
what is the equation used for an isocost line and what do the letters represent.
wL+pR:
w = wage
L = amount of workers
p =. price of energy source per unit
R = Amount of energy source being used.
What is the gradient in an isocost line?
-w/p. Why negative? because the relationship is an inverse.
How did we escape the Malthusian Trap?
Malthus did not expect that technological improvements would grow quicker than population growth. This hence offset the effects of diminishing average product of labour.
What were the two changes in wages due to changes in technology?
- The amount that can be produced
- The share going to workers. This depends on the workers bargaining power.
What are the main questions in this Unit?
Why was the world so poor for so long?
Why did Industrial Revolution begin in Britain?
How do firms choose production technologies?
When do technological changes sustain growth in living standards.
