Question

In: Economics

Many who use pirated software and illegal downloads of music and movies believe their actions are...

Many who use pirated software and illegal downloads of music and movies believe their actions are harmless. Identify some downsides for individuals and the economy of violating intellectual property rights.

Solutions

Expert Solution

When individuals violate intellectual property rights, it financially harms firms which spend resource to develop those products and services. Therefore, violation of intellectual property rights reduces the incentive for firms to make investments and innovate. So, violation of intellectual property rights results in lower level of innovations. Innovation has a multiplier effect on the economy; so, innovation helps all firms and the economy as a whole. Lack of innovation reduces economic efficiency, growth and results in wastages. So, the economy suffers due to lack of innovation. Innovation also improves the standard of living of people and provide more consumption options to consumers. So, lack of innovations reduces consumption choice of individuals and their overall standard of living. Moreover, lack of innovation hinders technological development, which reduces economic growth and efficiency.


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