Lecture notes for week 9 - Unit 2(ECO2004)

ECO2004L
MACROECONOMICS II




Unit 2 10
CHAPTER
Technology, Population
THE FACTS and Growth
OF GROWTH


Refilwe Lepelle



1




Key questions
• What is the Malthusian trap?

• What led to the Industrial Revolution in the 18th century?

• What do firms consider when making decisions about
production?

• What were the incentives for innovation before the Industrial
Revolution?

• Why did the Industrial Revolution begin in Britain in the 18th
century? What is Malthusian Economics?



2

, What we will cover
1
Malthusian Trap

2
Industrial Revolution

3
Economic Models
4a
Technology and Costs
4
Modelling a Dynamic Economy
4b
Innovation and Profit
5
Incentives for Innovation

6
Malthusian Economics


3




Malthusian Trap




4

, Economic Growth

Growth in real wages started in the 18th century.




5




Malthusian Trap
Thomas Robert Malthus (1798) “An Essay on the Principle of
Population”

• From the 1200 – 1700 there was essentially no significant growth
of output (income) per person in Europe.

• Agriculture was the main sector and had very little improvements
in technology.

• There was some output growth BUT this was proportional to the
increase in population which led to constant income per person –
subsistence level.

• Europe was in a Malthusian trap – unable to increase its income
per person.

• The proportional increase in output and population was not a
coincidence.

output = mortality rates = population



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