unit 5

• Industrial Revolution


  A period of development in the latter half of the 18th century, where there is change from one economy to another
• Industrial Revolution


  • Involves technological, socioeconomic, and cultural aspects
  • Occurs when technological change fundamentally transforms the way in which a society carries out the production and distribution of goods
• Invention


  The discovery of new products and processes
• Innovation


  The commercialization (bringing to the market) of new products or processes
• Invention


  • Machines
  • Telephones
  • Automobiles
  • Television
• Product innovation


  Results in the production of a new product, such as the change from a three-wheel car to a four-wheel car, or the change from LP (Long Play/Playing) records to CDs (Compact Discs)
• Process innovation


  Increases the efficiency of the methods of production of existing products, for example the invention of the assembly-line technique
• First Industrial Revolution - 1765


  • Products / Services – Vegetables, Coal, Iron, Discovery of chemicals
  • Transportation – Railroads, Basic farming
  • Production System – Manual Labor to mechanical
  • Communication - Printed materials
• Second Industrial Revolution - 1870


  • Significant evolution: Development of electricity, Internal-combustion engine, Railway, Chemical industry
  • Products / Services – electricity, chemicals, petroleum, steel
  • Transportation – automobiles, aircrafts
  • Production System – machine-aided equipment
  • Communication – telephone, telegraph
• Third Industrial Revolution - 1969


  • Products / Services – Internet, rise of electronics, source of energy: nuclear power
  • Production System - Automation
• Fourth Industrial Revolution - 2000 onwards


  Marked by an era of technological revolution that is blurring the lines between the physical, digital and biological spheres
• General Purpose Technology (GPT)


  A technology of wide application used in various industries and whose impact is strong on their functioning
• Characteristics of a GPT


  • Wide scope for improvement and elaboration
  • Applicable across a broad range of uses
  • Potential use in a wide variety of products and processes
  • Strong complementarities with existing or potential new technologies
• Productivity


  • The quality of producing something
  • A measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into useful outputs
  • An indication of the efficiency of production or distribution
• New invention permits workers to produce more in the same amount of time

  Productivity has been doubled
• Gross Domestic Product (GDP)


  • Total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period
  • Total output divided by total labour hours in the year gives us a measure of labour productivity
• Calculating percentage increase in productivity

  1. Subtract previous year's output from current year's output

  2. Divide the increase by previous year's output

  3. Multiply by 100 to get percentage
• Division of labor


  The degree to which the various tasks involved in the production of a good or service are divided among different workers
• Productivity increases


  When the division of labor increases
• Increases in productivity


  • Can lead to higher incomes for an economy's citizens
  • Tend to lower the cost of production
  • Tend to reduce prices
• Price index


  A measure of the average level of prices for some specified set of goods and services, relative to the prices of a specified base period
• Calculating price index


  Price in current year / Price in base year * 100 = Price index
• Constructing a price index

  1. Selecting a base year

  2. Expressing prices in other years relative to the base year

  3. Calculating the price index
• Price index calculation example

  • Price in 2000 (base year) = 100%
  • Price in 2001 = (750/500)*100 = 150
  • Price in 2002 = (1000/500)*100 = 200
• Industry structure


  The way in which power is distributed among firms, described by factors like number of firms and distribution of market shares
• All economies fluctuate in a business cycle
• Industry life cycle


  The economic mechanisms that cause firms to be born, grow, and die
• Phases of industry life cycle

  1. Pre-market/hobbyist phase

  2. Introductory phase

  3. Growth phase

  4. Mature phase
• Game changing technologies


  • Advanced industrial robotics
  • Additive manufacturing
  • Industrial internet of things
  • Electric vehicles
  • Industrial biotech
• Advanced industrial robotics


  Machines designed to perform industrial tasks automatically, with high programmability and digital sensors
• Additive manufacturing


  Digitally controlled devices that add layer-by-layer of material to create objects from 3D digital models
• Industrial internet of things

  The use of connected sensors on the factory floor to feed live data to central computers
• Electric vehicles


  Vehicles whose main propulsion depends on externally generated electricity rather than fuel
• Industrial biotech


  The use of biological processes of living organisms for industrial purposes, drawing on recent scientific insights
• Effects of game changing technologies

  • Increasing centrality of (digital) information
  • Mass customization
  • Servitization
  • Increased labor/resource efficiency
• Effects of game changing technologies on work and employment

  • Upgrading of occupations
  • Higher level of ICT competence
  • Decline of repetitive and routine industrial work
• There are both positive and adverse effects of game changing technologies
• Platform economy


  A business model that connects people through technology, allowing value to be created and exchanged
• Key features of a platform

  • Sophisticated logistics software for matching and payment
  • Providers are independent contractors
  • Low barriers to entry for providers
  • Trust achieved via crowdsourced ratings and reputational data
• The platform model has three components: platform, consumers/customers, and producers/providers