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Summary HPI4001 Case 2
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Lecture Case 2 Economic Theories and Innovations EH1. What is innovation according to economists? (part 1 )
Innovation is defined as: successful exploitation of new ideas (Swann, 2009)
So it has to have an commercial aspect and the idea has to be completely new
Simple model of innovation:
1. Research and creativity (looking at a bird, why cannot people fly?)
2. Invention (wings on people)
3. Design and development (look like an airplane)
4. Innovation (end-result of sequence of steps, in this case modern airplane)
Difference between invention and innovation:
Invention: generation of new ideas through research or other form of creativity
Innovation: the commercial application of an invention (Swann, 2009)
Types of innovation:
Product innovation (new medicine)
Process innovation (new way of distributing this medicine to the patient within the hospital)
Organizational innovations (outsource pharmaceutical branche from hospital)
Economics: science studying scarcity (=tension between unlimited needs and limited possibilities to
fulfil these needs) -> so you cannot have everything you want basically
When you choose to spend your money on clothes for example, you allocate your money
(scarce resource) to this purpose in economic terms.
Opportunity costs: the costs for the other alternative option that you did not choose
Scarcity has to do with choices. So you want to choose the best option with the least opportunity
cost and the one you prefer the most.
All in all, Economics studies the efficient allocation of scarce resources (time, money, lectures e.g.).
Many of these resources are also present in healthcare so it is important to take a look at them.
Adam Smith (Wealth of Nations 1776): first person who talked about scarcity. He wrote a book
about this about scarce resources and about how we can reduce the tension -> How can we achieve
macro-economic welfare/economic growth in our nation?
Neoclassical economic framework (1776-1920): following ideas of Adam Smith which incorporates
all kind of behavioural models
Consumer and scarcity
Producer and scarcity
Market and scarcity (invisible hand -> try to balance the needs of producers and consumers)
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