What are the disadvantages of technological change?

Watch this thread
np1908
Badges: 7
Rep:
? You'll earn badges for being active around the site. Rep gems come when your posts are rated by other community members.
#1
Report Thread starter 1 month ago
#1
I am currently writing a 25 mark essay on, "What are the impacts of technological change?", my first point is on creative destruction and my evaluation is that it forces firms to utilise new technology like robots which replace workers, but what would my second point be?

I've thought about the implications of digital monopolies like Google and Facebook and how they use their monopoly power to increase the price of advert thus increasing costs for small businesses which would make the market less competitive. I'm not sure if that is right though.
0
reply
KH29
Badges: 11
Rep:
? You'll earn badges for being active around the site. Rep gems come when your posts are rated by other community members.
#2
Report 1 month ago
#2
There are many disadvantages that come with technological change:

Loss Of Jobs
As you mentioned, technological change has meant that machinery has replaced human capital easily. Machinery became more efficient, productive and saved a lot of costs of firms.
Application - The Car Industry, Supermarkets replacing employers with self-checkouts, Glasgow Subway cutting drivers jobs as their metros will become driverless & automated.
Diagrammatic Analysis - Shift in demand in a labour market diagram

Price Discrimination
Technology has led to softwares & application being able to discriminate a price based on the consumer's PED. For example, during peak-hours when commuters will have price inelastic demand for railways to commute to work, prices will often be high. This is the opposite during off-peak times when commuters are charged lower prices, when demand is price elastic. Price Discrimination leads to a loss in economic welfare, allocative inefficiency & consumer exploitation. It could also potentially upgrade a firm's monopoly power, which is not good on consumers.
Application - Uber (or any other platform-based transportation apps), Railways
Diagrammatic Analysis - 3rd Degree Price Discrimination Diagram

Invasion of Privacy & Data
Facebook or Google allow users to their service for free at the expense of their data. Adverts will often come up based on the user's recent search history. Google and Facebook has come under massive scrutiny for data being misused leading to reputational damage to both firms. You could argue this is a market failure (loss of economic welfare).
Application - Cambridge Analytica

High Barriers To Entry & Exit & Monopoly Power
Although this can be justified - in some cases technological change has destroyed barriers to entry & exit and invited competition, there has been cases where firms have used technological change as a way to gain monopoly power - exploiting consumers with higher prices & lower quantity, creating high barriers to entry & exit, becoming productively, allocatively & X inefficient.
Application - Amazon (Amazon Retail, Amazon Kindle, Amazon Fire, Amazon Web Services, Amazon Prime, Amazon Grocers / Fresh etc.)
Diagrammatic Analysis - Draw a theory of a firm diagram, showing the output of a monopoly & a competitive market and shade in the deadweight welfare loss.

Sorry no one has responded to you, I hope what I said is useful - good luck in your exam!
Last edited by KH29; 1 month ago
0
reply
np1908
Badges: 7
Rep:
? You'll earn badges for being active around the site. Rep gems come when your posts are rated by other community members.
#3
Report Thread starter 1 month ago
#3
(Original post by KH29)
There are many disadvantages that come with technological change:

Loss Of Jobs
As you mentioned, technological change has meant that machinery has replaced human capital easily. Machinery became more efficient, productive and saved a lot of costs of firms.
Application - The Car Industry, Supermarkets replacing employers with self-checkouts, Glasgow Subway cutting drivers jobs as their metros will become driverless & automated.
Diagrammatic Analysis - Shift in demand in a labour market diagram

Price Discrimination
Technology has led to softwares & application being able to discriminate a price based on the consumer's PED. For example, during peak-hours when commuters will have price inelastic demand for railways to commute to work, prices will often be high. This is the opposite during off-peak times when commuters are charged lower prices, when demand is price elastic. Price Discrimination leads to a loss in economic welfare, allocative inefficiency & consumer exploitation. It could also potentially upgrade a firm's monopoly power, which is not good on consumers.
Application - Uber (or any other platform-based transportation apps), Railways
Diagrammatic Analysis - 3rd Degree Price Discrimination Diagram

Invasion of Privacy & Data
Facebook or Google allow users to their service for free at the expense of their data. Adverts will often come up based on the user's recent search history. Google and Facebook has come under massive scrutiny for data being misused leading to reputational damage to both firms. You could argue this is a market failure (loss of economic welfare).
Application - Cambridge Analytica

High Barriers To Entry & Exit & Monopoly Power
Although this can be justified - in some cases technological change has destroyed barriers to entry & exit and invited competition, there has been cases where firms have used technological change as a way to gain monopoly power - exploiting consumers with higher prices & lower quantity, creating high barriers to entry & exit, becoming productively, allocatively & X inefficient.
Application - Amazon (Amazon Retail, Amazon Kindle, Amazon Fire, Amazon Web Services, Amazon Prime, Amazon Grocers / Fresh etc.)
Diagrammatic Analysis - Draw a theory of a firm diagram, showing the output of a monopoly & a competitive market and shade in the deadweight welfare loss.

Sorry no one has responded to you, I hope what I said is useful - good luck in your exam!
OMG!!!!! thank you so much. This is soooooo helpful
1
reply
X

Quick Reply

Attached files
Write a reply...
Reply
new posts
Back
to top
Latest

Were exams easier or harder than you expected?

Easier (41)
25.95%
As I expected (52)
32.91%
Harder (58)
36.71%
Something else (tell us in the thread) (7)
4.43%

Watched Threads

View All