Unit 2: TECHNOLOGY, POPULATION & GROWTH

Question 1

What is the Malthusian Theory?

Answer 1

A theory that states that the supply of food can’t keep up with the rate of human population growth, inevitably resulting in disease, famine & war.

Question 2

Why did Malthus state that sustained income per capita growth is not possible?

Answer 2

1. If technology raised productivity of labour, people would be temporarily better off.
2. People will use the additional income to raise more kids.
3. Population growth would continue until living standards fell to subsistence level (minimal income).

Question 3

How did the world escape the Malthusian trap?

Answer 3

The Industrial Revolution.

Question 4

That was the Industrial Revolution?

Answer 4

A wave of technological advances &
organisational changes (starting in Britain in the 18th c.), transforming an agrarian & craft-based economy into a commercial & industrial economy.

Question 5

How did we escape the Malthusian trap through the Industrial Revolution?

Answer 5

1. Technology improves, raising labour productivity.
2. Labour productivity rises faster than population growth.
3. Incomes rise faster than population.

Bottom Line: as long as technology improved quick enough, it could outpace the population growth that resulted from the increased income.

Question 6

Why did the Industrial Revolution begin in Britain?

Answer 6

• Low cost of local energy.
• Abundance of natural resources from the British Empire territories.

Question 7

What is an economic model?

Answer 7

A simplification of the world that explains actions & interactions of economic agents, predicting the most likely outcome.

Question 8

What is considered when building an economic model?

Answer 8

• Describe the conditions in which economic agents take action.
• Describe what determines the actions of economic agents (objective function).
• Determine how each action affects other economic agents.
• Determine the outcome of these actions (equilibrium).
• Address what happens to the equilibrium when conditions change.

Question 9

What is economic rent?

Answer 9

Benefits - Costs From Option Taken - Foregone Benefit From Next Best Option.

Question 10

What is an isocost line?

Answer 10

A line representing all combinations that cost the same.

Question 11

Along an isocost line…

Answer 11

… the cost remains the same.