Question

Existing products do not need to be reinvented – it’s a waste of resources”. Argue your position.

Answer 1

Introduction

Economists have correctly stated, that resources are scarce and have alternative uses. This means, that whenever an organization decides to produce a good, this production can be done for alternatives as well. Usually a firm invests in those sectors wherein the production would yield the best possible result and profit and tries its best to increase the profits over a period of time. For example, if the production on a piece of land yielded different profits for wheat and rice, the producer would choose to manufacture the one with the maximum profit.

Now, that we know that resources have alternative uses as described by economists and that producers try and maximize their returns over a period of time, it is crucial then to review whether or not, there is an increasing need for reinvestment to be done.

Case Specifics: -

In the current case, we need to argue if there is a need to innovate on existing products and service offerings and from an economic point of view, if it leads to waste of resources or not.

Over the years, the core reason for firms such as Apple and Microsoft to be able to make products which sell like hot cakes is the fact that they have been constantly innovating and improving their products.

With innovations comes the added advantage of a consumer needs being fulfilled in a better manner. This gradually increases the demand for goods and services in any economy and goods then can be produced cost effectively as demand brings in revenue which can be reinvested to create higher profits for firms.

To disallow innovation on the contrary creates companies which are reluctant as is the case with many government owned companies and it does not allow maximum profits to be made.

Operating at a level less than optimum disallows for profits to accumulate over time and this may lead to waste of resources wherein due to lack of innovation we do not provide best possible goods to the society and earn lesser thus wasting the land or raw materials which we use in the process of manufacturing.

Thus, we can conclude by saying, that innovation brings productivity to a manufacturing process, whereby it becomes easier and cost efficient to produce a good at a given price and increases profit margins for a firm. This further ensures that the economic concept of making sure that raw material is utilized in the best possible manner is also fulfilled.

Please feel free to ask your doubts in the comments section if any.