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July 15, 2018 

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FARM PROBLEM: The short-run situation in which weather variability creates large fluctuations in farm prices, combined with the long-run situation in which technological advances increase production capabilities even though the demand for agricultural production declines relative to the growth of the overall economy. Taken together these two situations lead to highly unstable farm incomes that tend to decline over time. The solution to this problem has been significant government intervention in the agricultural industry, especially through assorted subsidies and price floors.

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TECHNOLOGY:

The sum of the knowledge and information that society has acquired concerning the use of resources in the production of goods and services. Technology often takes the form of scientific knowledge (the best combination of chemicals to make a long-lasting floor wax), but can also be plain old common sense (irrigate during a drought, not during a flood). Whether scientific or common sense, technology affects the technical efficiency with which resources are combined in production.
Technology is an intangible, often unseen dimension of the economy. The consequences of technology are commonly seen, but the technology itself is not. Technology is also commonly misunderstood, usually being equated with the latest scientific discoveries or inventions. For example, in the modern economy the term technology is used almost synonymously with computers.

Technology, however, is not a particular industry or type of product. It is the collective knowledge of a society. It can be advanced, or it can be ancient. Technology is simply what society knows about production, about combing scarce resources into valuable goods and services.

Consider these examples:

  • Jasper Von Zeffingstone is a computer programmer for OmniComputers. His company manufactures the latest and fastest computers. Jasper programs the computer's operating system and is clearly involved in technology, a technology that improves the efficiency of information processing.

  • At home Jasper opens a can of baked beans for dinner with a manual can opener. This simple device, with cutting wheel, gears, and crank, embodies the technology of opening cans. The can itself incorporates the technology of preserving food. Not particularly modern or advanced technology, but important nonetheless.

  • After dinner, Jasper yells at his neighbors through paper thin walls, requesting that they reduce the volume of their stereo. Not only is the stereo system the embodiment of an enormous amount of technology, the language that Jasper employs when communicating with his neighbors is also an important aspect of technology.

Enhanced Production

Technology is production methods and techniques. An increase in technology is thus an improvement in the technical efficiency of production. Improved technology results in more output with given inputs or fewer inputs for a given output. It is this production improvement aspect of technology that generates the most notoriety and helps explain why technology is often associated with "advances."

Technology is basically a two-part process. It surfaces in both inanimate objects, such as capital, as well as in people, as human capital. A can opener, as simple as it may seem, requires a person who can attach it properly to the can and turn the crank in the correct direction. Without this human knowledge, the can remains unopened and Jasper does not eat.

Technology is often embodied in capital goods. That is, productive machinery is designed that make use of this knowledge. A computer, for example, is bigger, better, and faster, because it embodies advances in silicon chip technology.

However, technology is also embodied in people. In fact, the technological embodiment in people might be the most important aspect of technology. Technology is, after all, society's collective knowledge.

When embodied in people, technology is termed human capital. Medical doctors who make use of a particular surgical procedure provide an example of human capital. Jasper using language to communicate with his neighbor offers another example.

A Source of Growth

Technological advances are perhaps most important to the economy as a source of economic growth. Throughout history, and particularly the last century in the United States, technology has been one of the more important sources, if not THE critical source, of economic growth. This growth has improved the standard of living and lessened the scarcity problem significantly. There is no reason to think that this is trend will change in the near future.

However, similar to other sources of economic growth (building factories, exploring for minerals), the advance in technology requires the act of investment in education, scientific research, and product development. The development of technology means other activities, especially current consumption, cannot be pursued. The development of technology, as such, is not without cost.

A Key Determinant

Technology surfaces as a key determinant in several analytical models, causing the shift of a curve. It is one of the five determinants of the market supply curve (the other four are resource prices, prices of other goods, supplier expectations, and number of sellers in the market). An increase in technology results in a rightward shift of the market supply curve.

Technology is also a determinant in aggregate supply and production possibilities. An increase in technology is analytically represented by a rightward shift of the long-run aggregate supply curve (which also entails a rightward shift of the short-run aggregate supply curve) and an outward shift of the production possibilities frontier.

<= TECHNICAL EFFICIENCYTECHNOLOGY, AGGREGATE SUPPLY DETERMINANT =>


Recommended Citation:

TECHNOLOGY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: July 15, 2018].


Check Out These Related Terms...

     | production | technical efficiency | specialization |


Or For A Little Background...

     | scarcity | efficiency | economic growth | value | seventh rule of complexity | scarce resources |


And For Further Study...

     | opportunity cost | Star Trek | institution | seven economic rules | economic goals | production possibilities curve | economic growth, production possibilities | production cost | market supply | investment expenditures |


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