Advances In Technology

Our second assumption is that we have constant, unchanging technology. In reality, technology has progressed dramatically over time. An advancing technology brings both new and better goods and improved ways of producing them. For now, let's think of technological advances as being only improvements in capital facilities— more efficient machinery and equipment. These advances alter our previous discussion of the economic problem by improving productive efficiency, thereby allowing society to produce more goods with fixed resources. As with increases in resource supplies, technological advances make possible the production of more robots and more pizzas.

Thus, when either supplies of resources increase or an improvement in technology occurs, the production possibilities curve in Figure 2- shifts outward and to the right, as illustrated by curve A, B', C, D', E' in Figure 2-4. Such an outward shift of the production possibilities curve represents growth of economic capacity or, simply, economic growth: the ability to roduce a larger total out ut. This growth is the result of (1) increases in supplies of resources, (2) improvements in resource quality, and ( ) technological advances.

The consequence of growth is that our full-employment economy can enjoy a greater output of both robots and pizzas. While a static, no-growth economy must sacrifice some of one roduct in order to get more of another, a dynamic, growing economy can have larger quantities of both products.

Economic growth does not ordinarily mean proportionate increases in a nation's capacity to produce all its products. Note in Figure 2-4 that, at the maximums, the economy can produce twice as many pizzas as before but only 40 percent more robots. To reinforce your understanding of this concept, sketch in two new produc-

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