10. Production, Costs & Revenue - Technological Change Flashcards
Reasons for tech. change?
Better knowledgeBetter fundingBetter access to patents to incentives tech. development
What are the two aspects of tech. change?
Invention and Innovation
What is invention?
Creation of a new idea without it necessarily becoming a commercial reality
What is innovation?
Transforming an invention into a commercial reality
How can innovation vary in scale?
It could be simply changing the production process of a business or it could create entirely new industries
What is the idea of creative destruction and how is innovation significant in it?
Through innovation new industries can be formed and developed but the forming of these new industries may destroy and replace pre-existing older ones - this process is called ‘creative destruction’
Give an example of CD
Cars - as they’ve improved it has destroyed public transport systems in some parts of the worldMusic - streaming sites have replaced CD markets
What may technological change lead to?
More capital or labour intensive production depending on the industry Making cars - more capital (robots)Doctors - more labour
What impact has tech. change had recently?
Over the last 40 yrs more jobs have been created than lost
What will tech. change do to long-run costs of production?
LRAC of production will fall as tech. allows increased productivity at lower costs - technical economies of scale and specialisation will allow this to happenAlso, the MES can occur at a greater quantity
What will tech. change do to efficiency?
Productive - yes - costs fall we can produce at a lower point on LRAC curveAllocative - depends on whether the lower cost are passed on to consumersDynamic - yes definitely - shld allow development over time
What impact will tech. change have on market structures?
Barriers to entry - decreased - internet - less need for physical premises - decreased start-up costs - no premisses - easier to meet laws on premises ownership - better advertising - break into markets more easily BUT;Better economies of scale may increase barriers to entryNo. of firms - depends on barriers to entry - if increased, less firms - if decreased more firmsProduct homogeneity - greater variety of products Knowledge - internet - improve information for consumers - also producers - can see other businesses technology etc., develop there ownBUT; patents etc may serve to reduce knowledge
Overall what affect has technological development had on market structures?
Generally markets have become more competitive and more contestable - e.g. uber in the taxi industry & air b&b’s
