Eco 2 Module 1.1.docx - ECONOMIC DEVELOPMENT MODULE 1.1...

ECONOMIC DEVELOPMENT
Learning Objectives:
1. Differentiate among invention, innovation, and technological diffusion.
2. Explain how entrepreneurs and other innovators further technological advance.
3. Summarize how a firm determines its optimal amount of research and development
(R&D).
4. Discuss how technological change can increase profits by raising revenues or lowering
costs.
5. Relate why firms can benefit from their innovation even though rivals have an
incentive to imitate it.
6. Discuss the role of market structure in promoting technological advance.
7. Show how technological advance enhances productive efficiency and allocative
efficiency.
Innovation, Invention, and Diffusion
1.
Differentiate among invention, innovation, and technological diffusion.
For economists, technological advance occurs over a theoretical time period called
the very long run , which can be as short as a few months or as long as many years.
Compare the concept of the very long run with the two shorter duration time concepts that
we developed while discussing the four market models (pure competition, monopolistic
MODULE 1.1
TECHNOLOGY, R&D, and EFFICIENCY

Invention
The basis of technological advance
is invention : the conception of a new
product or process combined with the
first proof that it will work. Invention is a
process of imagination, ingenious