technology Flashcards
(31 cards)
What was the Industrial Revolution?
A complex combination of intellectual, technological, social, economic, and moral changes.
What is subsistence income equilibrium?
Income at subsistence level is stable—deviations self-correct due to population changes.
What does ceteris paribus mean?
‘All else equal”—holding other variables constant to isolate effects
Why do incentives matter?
They influence choices by altering the benefits/costs of actions.
What are relative prices?
The ratio of one price to another (e.g., labor vs. energy costs).
What is economic rent?
Benefit from chosen action minus benefit of next-best alternative.
What are innovation rents?
Profits from adopting a cost-reducing technology before competitors.
How do firms choose technology?
By minimizing costs: Cost = (wage × workers) + (coal price × tonnes).
What is an isocost line?
Shows all input combinations with the same total cost. Slope = -wage/coal price
How does innovation raise profits?
ΔProfit = ΔRevenue - ΔCosts
What is creative destruction?
New tech replaces old, driving inefficient firms out of business.
Why did Britain industrialize first?
High wages relative to energy/capital costs incentivized labor-saving tech.
Key differences: Old vs. New Tech?
Old: Labor-intensive, energy-saving.
New: Capital-intensive, energy-using.
What is diminishing average product of labor?
More labor on fixed land → lower output per worker (e.g., 800 farmers → 625 kg each; 1,600 → 458 kg).
Malthus’s two key ideas?
Diminishing returns to labor.
Population grows when incomes rise.
What is the Malthusian equilibrium?
Wages stabilize at subsistence level; population growth offsets tech gains.
Why did tech improvements fail to raise incomes long-term?
Higher wages → population growth → labor surplus → wages fall back to subsistence.
How did England escape the trap?
Wages stayed high relative to coal/capital costs, fueling tech adoption.
Two influences on wages?
Total output (size of the pie).
Workers’ bargaining power (share of the pie).
Why did creative destruction raise living standards?
Tech progress + capital accumulation reinforced each other, increasing productivity.
What does it mean that job creation is procyclical?
Job creation increases during economic booms and decreases during recessions.
What does it mean that job destruction is countercyclical?
Job destruction increases during recessions and decreases during economic booms.
What is the Beveridge curve?
It’s the relationship between job vacancy rates and unemployment as a fraction of the labor force.
