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Imagine the world without innovation and creativity. How will an economy look like? Obviously not competitive, not globalized and not developed. Inventions, lateral thinking and creativity in tech-world are crucial for long-term economic growth and development. Over the years, US’s wellbeing has been enhanced by science and technology. Soviet Union’s 1957 launch of its satellite initiated a wave of America’s investment in technical elements such as engineering and aerospace. Due to this, both public and private sector investment created employment, competitive advantage, fueled more innovation ad leaded to US in the top of the list of different fields. Now imagine US not initiating investment in science. It wouldn’t have achieved this position easily and the world would have remained backward. (West, 2011)
Also imagine only US economy being high-tech and other economies having no technological advantage. This would lead to exploitation of resources and concentration of wealth towards technical economy only.
These are the examples which will further be elaborated in theories of macro and micro economics but first let’s see how technology is important for the world.
Importance of Science and innovation
This world is now totally globalized and that is due to technology which is growing day by day. Almost everything is controlled through technical means may it be on an individual level or an economy as a whole. Technology therefore plays a vital role as it is the way to handle tasks technically through the use of innovative or creative tools.
Impact of high-tech on an economy
We now know that science is very important and is changing the world. What about economies or states? These are those intangible mechanisms which are also changing with respect to it.
Technology has basically been linked to the wealth of the nation, changes in the marketplace such as demand and supply, standard of living, labor market employment and international trade. These cover micro as well as macro-economic aspects which will be discussed in detail by showing the impact of technical elements on every individual theory of economics. (Dictionary.com, 2015)
Technology and Economics:
Here the discussion will be based on the impact of machine inventions on micro-economics as well as macro-economics and its influences on equilibrium.
Microeconomics
Demand and Supply
Demand and Supply is very much affected by technical aspects as according to the basic economics, there are certain factors that affect demand and supply and this aspect is one of them. Demand and supply are represented graphically in accordance with the price and quantity. These are very basic fundamental models used to forecast prices and market reactions according to market conditions that change, for example, due to technology. Generally technological change affects supply side however; it can also cause a shift in the demand side if we see it graphically.
Demand:
For example, smarter personal finance in B2B business will lead to more demand creation of production materials which will further lead to a smooth transition in the production.
Another example is,Kodak is for sure known to be the first one to invent digital camera. (Blatt, 2014)Its demand was high when the best models were introduced in the market however, as enhancement in scienceof Kodak increased, it was too late to adapt to the technology therefore causing a shift in the demand to the left side or a decrease in the demand and thenleading to a shift in the equilibrium. The graph below proves that technological change can cause a shift in the demand affecting price as well.
Supply
On contrary, the most prominent use of technical road in supply is the ability to increase production therefore leading to either a shift in the supply curve towards right or towards left. (Doc, 2015)
Advancement in production means that supplier can produce efficiently, for example, invention of robots for assembling the cars which resulted in perfection as well as decrease in the cost of production in the long run. This is also explained in the technological economy of scale where when the company becomes large, it can invest more in highly automated machines enhanced in accordance with the current situation of innovation therefore leading to lower cost of production per unit. When supply increases due to technology, supply curve shifts to right therefore, showing an increase in the supply of that good for that certain industry.Moreover, when you talk in terms of financial-tech, stock and trading can lead to supply of money by the state therefore leading to increased innovation and production. This example is exclusively business men trading in stocks.