Question

In: Economics

What is creative disruption and how can disruptive innovation be a positive contributor to our economy?...

What is creative disruption and how can disruptive innovation be a positive contributor to our economy?

Give an example of a industry that has experienced or is experiencing a process of disruptive innovation.

How would you measure this success from an economic perspective?

Solutions

Expert Solution

Creative disruption is when a new innovation or practice is radically changing how the market system works in an economy.Such disruptions happen all around us where a single piece of innovation completely overturns the existing markets permanently changing it in the process.Its often refers to small companies with few resources directly challenging monopolies or huge companies using innovations.

Disruptive innovations are mostly positive contributors to the economy.They increase the efficiency of the market and create new jobs in the process.Most often output of the market is drastically increased after the innovation.Equilibrium prices shifts down due to this.Overall affordability for consumers increases.

One of the best examples of creative disruption is Netflix.When Netflix started out,it's initial offering wasn't that fancied by movie goers.They still preferred theatres.But right now we can see Netflix has disrupted the market in such a way that it's directly drawing audience from movie goers.

In an economic perspective,Netflix has done very well.More variety of contents are being produced and more no of people are being drawn into the movies and series.Even people who don't have enough time to go watch a movie are subscribing to Netflix which in turn will increase the overall revenue generated. Much better exposure can be given to movies which will increase wages and benefits for the movie casts.Though this will have a negative effect on no of people showing up at theatres,the overall benefit of it outweighs defects.


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