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Relative Prices and Technology Choice in the Industrial Revolution
The choice of production technology during the Industrial Revolution provides a key historical example of the importance of relative prices. Firms' decisions to adopt new technologies, such as the steam engine, were heavily influenced by the ratio of input costs—specifically, the price of energy (e.g., coal) compared to the price of labor (the wage rate).
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Social Science
Empirical Science
Science
Economy
CORE Econ
The Economy 1.0 @ CORE Econ
Economics
Ch.2 User-centered design process - User Experience Design - Winter 23 @ UI Design in UI @ University of Michigan - Ann Arbor
UI Design in UI @ University of Michigan - Ann Arbor
User Experience Design - Winter 23 @ UI Design in UI @ University of Michigan - Ann Arbor
UI @ University of Michigan - Ann Arbor
User Experience Design @ UI Design in UI @ University of Michigan - Ann Arbor
University of Michigan - Ann Arbor
Introduction to Microeconomics Course
Ch.2 Technology and incentives - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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Effect of Proportional Price Changes on Economic Decisions
Bakery Production Decision
A textile manufacturer is deciding between two production technologies. Technology A is labor-intensive, requiring many workers. Technology B is capital-intensive, requiring expensive machinery. The manufacturer is considering opening a factory in one of two regions with different input costs:
- Region 1: Average wage is $15 per hour; Machine cost is $60 per hour.
- Region 2: Average wage is $20 per hour; Machine cost is $100 per hour.
Based on a comparison of the input costs, in which region would the manufacturer have a stronger economic incentive to adopt the capital-intensive Technology B, and why?
A coffee shop owner currently pays baristas $15 per hour and an espresso machine costs $30 per hour to run (including maintenance and energy). A new city-wide minimum wage law increases barista pay to $20 per hour, while the machine's running cost remains unchanged. Assuming the owner's goal is to minimize production costs, this change in hourly costs provides a new economic reason for the owner to consider using more automated machinery relative to human labor.
Inflation and Purchasing Decisions
Commuting Decision Analysis
Match each economic scenario with the correct description of the change in relative prices and the resulting incentive.
A student's budget allows for spending on either coffee or bus fare. A cup of coffee costs $3 and a one-way bus ticket costs $1.50. To make a decision based on the trade-off, the student calculates that the cost of one cup of coffee is equivalent to ____ bus tickets.
A city government wants to reduce traffic congestion by encouraging commuters to switch from driving their personal cars to using public transportation. Currently, the average daily cost of driving is $10, and a public transport day pass costs $5. Which of the following policy changes would create the strongest economic incentive for a commuter to make this switch?
Harvesting Technology Adoption
A furniture manufacturer uses both skilled carpenters (labor) and automated cutting machines (capital) to produce chairs. Initially, the daily wage for a carpenter is $200 and the daily operational cost of a machine is $400. The government then introduces a subsidy that reduces the machine's daily operational cost to $200. Arrange the following steps in the logical order that describes how the manufacturer would economically reason about adjusting their production method in response to this change.
Supermarket vs. Corner Shop
Relative Prices and Technology Choice in the Industrial Revolution
Learn After
Technology Adoption in 18th-Century Manufacturing
A textile firm in the 18th century can choose between two production technologies to produce 100 units of cloth. Technology A is labor-intensive, requiring 4 workers and 2 tonnes of coal. Technology B is energy-intensive, requiring 2 workers and 5 tonnes of coal. The firm is considering two locations: Manchester, where a worker's wage is £10 and a tonne of coal costs £20, and Strasbourg, where a wage is £20 and a tonne of coal costs £10. Based on the relative costs of inputs, which statement accurately analyzes the firm's most profitable choice?
Evaluating the Drivers of Industrial Revolution Technology
Incentives for Technological Adoption
Consider a historical setting where the cost of labor (wages) increases significantly, while the cost of energy (coal) remains unchanged. In this scenario, a profit-maximizing firm would have a reduced economic incentive to switch from a labor-intensive production method to a new, coal-powered, labor-saving technology.
A firm in the 18th century is deciding whether to use a traditional, labor-intensive production method or invest in a new, energy-intensive (coal-powered) machine. Match each economic scenario with the most likely decision a profit-maximizing firm would make based on the relative costs of inputs.
Technological Innovation and Regional Adoption
An inventor in the 18th century develops a new machine that significantly reduces the number of workers needed to produce a certain good but requires a large amount of coal to operate. In which of the following economic environments would this invention provide the greatest economic advantage and therefore be most likely to be widely adopted first?
Strategic Business Decisions in 18th-Century Britain
Technology Choice and Input Costs