Question

a. What do empirical findings suggest regarding the short run and medium run effects of technological change on employment/unemployment?

b. Explain the two factors that determine spending on Research and Development, as discussed in your textbook?

Answer 1

a.

Technological change indicates improvement of doing work. Few examples are machining operation, computerised checking, etc.

Effect in short-run: it eliminates errors, waste, and increases standardization. Such as in machining operation, waste of materials in production would be very low. But it increases unemployment in the short-run, because structural unemployment increases – workers do not know how to operate the new technology.

Effect in medium run: This increases productivity and efficiency in the medium-run that reduces structural unemployment – people get to know how to operate the new technology and increase their efficiency.

b.

Required factors are as below:

No.1) competitive edge: R&D helps to reduce production cost that increases profit margin. A competitive price could be offered in the market, which increases market share.

No.2) Long-run sustainability: if the firm wants to do business for long period of time, it must have to maintain environment. R&D is required there in order to get better way of manufacturing for environmental sustainability.