1. Technology, R & D, and Efficiency. a. Thoroughly and completely explain Inven
ID: 1210580 • Letter: 1
Question
1. Technology, R & D, and Efficiency.
a. Thoroughly and completely explain Invention
i. Distinguish between invention as a process and invention as a result.
1. Should be pretty straight forward.
ii. We live on a planet with finite resources which makes continued economic growth difficult to maintain. If we are seeing economic growth rates flatten out, please explain how invention might be impacted by a slow growth /no growth economy, and what can we do about this problem? Be specific.
1. Discuss invention as a process and compare that to invention as a result.
Give 2 examples of each, and discuss how each might be affected by a slow growth / no growth economy.
b. Explain Innovation. i. What is it?
ii. For each of the typical types of innovation:
1. Provide 2 examples of each (that were not included in the slides or audio) and explain why these are good examples of those types of innovation.
2. Explain how these two types of innovation were used to drive up profits. a. Discuss the 2 key factors required to drive up profits – drive
down costs and drive up revenues.
b. Might want to include how new products gain customer acceptance, including the importance of the relationship between price and utility.
c. Process innovation is often used to get leverage on lowering
costs, might want to discuss how impacts total product, ATC, and profit.
d. Some of the process innovations of Wal-Mart might be good to look into.
iii. Explain how our ability to do process and product innovation might be impacted by a slow growth / no growth economy, and what we can do about the problem.
1. How is innovation impacted during times of slow growth or no growth?
2. May have to consider what is required to actually deliver innovations to the market.
c. Explain Diffusion. i. Define it,
ii. Explain how it works,
iii. Give 3 examples involving firms that have lead diffusion of some innovation and why these represent good examples of diffusion,
iv. Discuss how diffusion might be affected by a slow growth / no growth economy.
1. Since diffusion is not free, how might it be impacted by economies that are not growing or only growing slowly?
d. You work for Mr. Elon Musk and he has asked you to explain how his company can determine its optimal level of R&D spending.
i. Please explain the general concept of optimal level of R & D spending ii. Explain the marginal cost and marginal benefit components
1. You have a good list of items in the slide set – just need to provide explanations of the items.
iii. Explain how the optimal level of R & D spending is computed.
1. Feel free to use graphs to support your explanation.
2. Don’t forget to let him know that returns are expected, not guaranteed.
Explanation / Answer
Invention:- Invention is basically a method where in a noval product or technology is introduced. This can be basically a new invention all together or it can be a modification of a existant machine or a technology.
Invention is a concept which can be both - active and static, which means that it can be both a process and a result. Invention as a process is a state where the inventor recognizes that invention work in a particular area will be useful to the society and thus carries on certain work in that particular area. Over here the inventor is aware of the new invention which will follow whereas in invention as a result the invention follows in due course of time and is a consequence of the stages of development. Examples :-The genetic code, the role of vectors in transferring genetic information.
The advancement of the technologies have led the society towards mechanism. This has further led to increase in advancement of the society, optimum utilization of resources, availability of latest technologies, providing job opportunities, availability of better medicinal help. All this has helped in controloing birth rates, declining death rates thus maintaing a stable population, increment in earning level which has increased the per capita earning of the people and thus increased the standard of living and GDP of the country.
We live in a society where the resources are restricted and the population keeps on increasing. As a result invention in a economy is very essential to prevent the burden on the resources and at the same time make the limited resources available to all dependent population. In case no development takes place the resources might be depleted very soon. But advancement of technologies like green revolution helped in increment of foodgrains, the invention of airplane reduced the distance between countries and helped visiting other nations which opened further opportunities to the countries. As the inventions and innovations take place the total cost gets affected a lot and is reduced than the prior total cost before inventions. Similarly the average total cost also reduces to a certain level till where the law of diminishing marginal returns starts affecting. This further results in increase in profits.
Walmart radically changed the process of product distribution. They used methods like mammoth purchasing power and cross docking which increased the efficiency and led walmart to be a historical winner in logistics and operational management.
Economy of every country demands growth. Population of every country keeps increasing inspite of the control measures. If the country is under populated the country takes the burden till it reaches the optimum level of population. In this time it is important that the resources also increase. As per Malthusian theory the population of a country increases in geometric progression and the food grains suppy increases in a arithmetical progression. This difference can only be met by technology.
Diffusion:- It is defined as a theory which explains how, why and at what rate new technolgy spreads over time among the members of the social system.
The Diffusion of technology takes place in the following way:-
Examples of diffusion of invention:- IBM did not invent Personal Computers but after they saw the high potential in the market it entered. Cellular phones and pagers were first aimed for physicians and other price sensitive consumers but later the companies adopted a approach for mass segments after witnessing its sucess. Acceptance of credit cards in the market after a lot of struggle and changes is a great example of diffusion.
Diffusion in a slow growth economy is really hard because innovation can work only in an economy which is growing at a fast pace. Any product introduced in the market after it completes its Life cycle demands innovation. But in a slow growth economy since the market takes time in adopting to the new product it leads to a problem and wastage of time.By the time the market adopts it we reach the stage of further advancement.
Optimal R&D Spending:- The optimal R&D spending depends on the marginal benefits and the marginal costs that the firm gets after the R&D activity. In order to get the maximum profits a firm should expand its specific activity till the marginal benefit equals to the marginal cost. If the marginal benefit is more than the marginal cost than the firm can expand its activity whereas if the marginal benefit is less than the marginal cost than the activity should be stopped or not started. The R&D spending is a complicated decision because here we spend today and the results are expected in the future. But the MB=MC method is an appropriate one . Further, i would update Mr. Musk that the returns are expected and not guaranteed since the R&D spending itself depends upon the future involving an investment today.
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