Research and Development

Research and Development - Invention, Innovation, Diffusion...

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Invention, Innovation, Diffusion Expected Rate of Return
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Reduces Costs of Production n New and Improved Production Process and Distribution n Occurs over the Long Run n A 3 step process Invention Innovation Diffusion
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Invention Discovery of a product or process Prototype Patent (creates barrier for entry) n Innovation First successful commercial use n Product innovation n Process innovation n Diffusion Imitation, copying
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Bank to get business loan Issue Bonds Use of Retained Earnings n Marginal Benefit and Marginal Cost n MB = MC n MC = i <- interest rate n MB = Expected Return n The interest rate cost of funds (MC) = expected rate of return (MB)
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MB < MC Affordable but not profitable n No guarantee of profitability n Increased Revenues can increase profits Innovation n Sales = Revenues n Revenues = Price x Quantity Sold n Consumers: TU per $ Acceptance dependent on MU/$ More willing to accept small changes
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This note was uploaded on 03/24/2010 for the course ECO 113 taught by Professor Briggs during the Fall '07 term at Bryant.

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Research and Development - Invention, Innovation, Diffusion...

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