Question

(20) We discussed how business and entrepreneurship is also a source of growth (They are the sources of R&D which is actually investment in search of new, better and cheaper technologies.). Using the graph of supply and demand for automobiles in an open macro- economy, show how a world price for imports that undercuts the domestic equilibrium price can encourage domestic auto producers to engage in R&D to lower their cost curves and increase domestic output. If domestic producers are successful and totally eliminate imports, show how foreign R&D that lowers the world import price will lead to an increase in the output of autos and employment for the domestic and foreign economies combined. Note: The point of this problem is to show that R&D which is investment in new capital resulting form available savings leads to growth, at the firm and therefore at the national macro-economic level

Answer 1

Research and development refer to the activities companies undertake to innovate and introduce new products and services . It is often the first stage in development process.Companies across all the sector and industries undergo R&D activities .R&D under various innovation.

As productivity grows through research and development economy also grows.

Investments in Research also accelerate into economic growth.It create differentiated product. Thus creates new market Which creates new demand in the economy.

With new emerging market it creates more employment opportunities thus salary creation accelerate the macro economy of the country.

Research and development also accelerates exports because of its innovated products.It adds to the surplus to the balance of payment hence enhance the macro economic growth of the country.

Better research into new capital acts a a vicious growth,researched products , adds to further production thus again adds to more consumer market at the end corporation makes more profit thus directly affecting positively to the macro economy of the country.

Research and development acts as a booster :

various business strategies also gets improved.Operational efficiency of an organization is also improved. Its not important that research is only done in production, but concept of research can be used in Marketing,human resource planning , Marketing , sales and promotion etc.

Thus in long run marginal cost of the organization is decreased,therefore product cost also decreases . Hence gives the financial leverage to the company.

Its always been observed that any developed nation also keep aside there budget on R&D because Economy gets immense boost , GDP increases.