Explain the three growth-creating properties of innovation
1 . Innovation can create cumulative changes. Most often innovation creates new features or applications of previous technology. Once technical knowledge is created it can be used over and over again.
2 . Innovation has a public good property. Innovation is available to the entire public not just to a single firm, and it is non-depletable.
3 . Innovation has an accelerator property. A steady rate of innovation produces growth in output. A higher level of expenditure on innovation leads to an increase in the growth rate of GDP.
You might also like to view...
Assume a nation's current production possibilities are represented by the curve AB in the above diagram. Economic growth would best be indicated by a:
A. Shift in the curve from AB to CD
B. Shift in the curve from AB to EF
C. Movement from point 1 to point 2
D. Movement from point 3 to point 4
Suppose that a firm produces both steel and electricity. It is cheaper for this firm to produce both goods than it would be if they were produced by two separate firms. Further, as this firm increases its production levels of both products, the average cost of producing steel rises, while the average cost of producing electricity remains constant. This firm experiences:
A. economies of scope, diseconomies of scale in the production of steel and constant returns to scale in the production of electricity. B. economies of scope, economies of scale in the production of steel and constant returns to scale in the production of electricity. C. diseconomies of scope, economies of scale in the production of steel and constant returns to scale in the production of electricity. D. diseconomies of scope, diseconomies of scale in the production of steel and increasing returns to scale in the production of electricity.