Question

Briefly discuss what technology is and the constraints it imposes on productivity. What are fixed inputs? What are variable inputs?

Answer 1

Technology in economic terms means a directed use of available information in desiging, producing and utilizing goods and services. It can be tangible, which includes models, blueprints and operating manuals or intangible involving consultancy and training.

In order to extend productivity beyond the available level in an ideal full and optimum utilisation and efficient use of resources situation, technological progress is required. Given the available resources in an economy together with the state of prevailing technology, there is a tlimit upto which the productive capacity of the economy can expand. In order to expand the productive capacity beyond this point, technology needs to be developed. But if in a situation the state of economy is such that the technology level is static, the productive capacity would not develop further and technology will act as a hindrance to productivity.

Generally, technological state is said to be constant over a short period of time and is upgradeable in the long run.

Fixed inputs are those inputs that are combined with other inputs used in production in a fixed ratio and their ratio cannot be altered in the short run. Variable inputs, on the other hand, are those that are easily alterable in ratio according to the requirements.

Fixed inputs become variable inputs in the long run. For example, the machinery in a factory is a fixed input and the raw material can be the variable input.