Introduction to Economics Essay Example | Topics and Well Written Essays - 1750 words

Introduction to Economics - Essay Example Inventions are mostly related to the technological development. Generally, the technological solution of any problem is called invention. In spite of the fact that in today’s growing world many of the inventions are recorded (and performed) in fields far outside of the technology (Peng, 2010). Innovation The process through which an invention is brought in order to provide the users with the industry or market is called innovation. Innovations are critically important for the development of economy. Innovations are produced on the side of production and not on the consumption side. According to Schumpeter â€Å"But innovations do not usually appear spontaneously and neither are they generated in the following way: new wants are first created by consumers and under their pressure production apparatus is adjusted. It is the producer who usually initiates economic change, and if necessary edifies consumers...so if in the theory of circular flow it is not only possible but it is simply necessary to regard wants of consumers as independent and in fact basic factor, then in the analysis of changes our point of view must be reversed.† (Stokes, Wilson & Mador, 2010) Innovation doesn’t happen by chance but these are planned. Therefore it is necessary to a strategy and vision for innovation. Its strategy includes alternative plans, an actual overview of opportunities, effective analytical tools and the functioning of any speciality that one could have. Answer # 1 (b) Types of Innovation Innovation was clearly identified by the first economists named Joseph Schumpeter (Schumpeler. 1934). He classified innovation in five types in the 2nd chapter of his book The Theory of Economic Development (1934). According to Schumpeter the five main types of an innovation are (Stokes, Wilson & Mador, 2010): 1. Conquering a new source of raw materials 2. Introducing a new good 3. Introducing a new method of production 4. Opening a new market 5. Reorganising an indus try in a new way. Answer # 1 (c) Some of the examples of a Schumpeterian type of innovation are: 1. The development of a new or improved product conquering a new source of raw materials. 2. Internet-based financial services are an example of a new method for the introduction of new goods in market. 3. Pilkington's float glass process is an example of introducing a new method of production. 4. Direct marketing and internet marketing are examples of opening a new market. 5. BPR (business process re engineering) and TQM (total quality management) systems: Is the new method of innovative management. This method would be helpful in reorganizing the industry in a new way. Answer # 2 (a) Output per Worker Output/worker England Portugal Wine 3 4 Cloth 6 2 Absolute Advantage A nation that produces any service or good more efficiently than any other is said to have an absolute advantage of the production of that service or good (Zhang, 2008). In the above example it is not true that England h as absolute advantage over Portugal in every sector. By using the Labour theory of value it can be seen that in England one unit of wine is exchanged with three units of cloth, however, in Portugal two units of wine is exchanged for one unit of cloth. Therefore England has an absolute advantage in production of cloth whereas Portugal has an absolute advantage in wine production because in England one unit of cloth require less labour for its production and for the production of wine in Portugal