2.5.4 The impact of economic growth Flashcards
what are the 2 benefits of economic growth on consumers
what is 1 drawback of economic growth on consumers
-one benefit is that there will be an increase in demand for houses, this is because people now have more money and so are able to afford to buy properties. This increase in demand will lead to an increase in house prices, which increases people’s wealth, thus leading to a positive wealth effect.
-This positive wealth effect can also be seen via shares, they will increase in value as businesses are making more money and future prospects are good.Thus rising the prices of shares leading to a positive welath effect.
-Improved productive efficiency due to the innovation of better technology, this will lead to lower prices or higher quality goods.
-one drawback of economic growth on consumers is that it may lead to increased inequalities and so may not have any effect on the average consumer and may lead to inflation, which has negative effect for consumers (e.g erodes purchasing power)
what are the 3 benefits that economic growth has on firms
what are 2 drawbacks that economic growth has on firms
-investment will increase since businesses are more successful. they will have more money to invest and more incentive to invest as they know they can make moeny from their investments due to the higher demand.
-business confidence will increase as there is a potential increase in demand for the fims goods/services., this increse in conofidence will likely lead to an increase in investment.
-as a result of both increased investment by firms and the gvernemnt, technology is likely to improve, as more R+D has been undergone.This is likely to increase productive efficieny which may lead to lower costs and/or a decrease in price to attract demand whilst maintainng sustainable profit margins.
-one drawback is that firms who sell inferior goods may lose out.
-another drawback is thatchanging technologies and globalisation also mean that some firms find their markets disaperaing/going obsolete
what are the 2 benefits of economic growth on the government
what is the disadvantage of economic growth on the government
-one benefit of econmic growth on the government is that it may lead to an increase in tax revenues. This is because more goods and services are being bought and profits are higher, this will lead to an increasse in corporation tax. As more people are woking too, income tax revenues will also be greater.
-another benefit of economic growth on the governemnt is that it can help to reduce the government budget deficit, may even bring about a budget surplus which would allow money to be saved for future recessions.
-one disadvantage of economic growth on the governemnt is th , it tends to lead to people expecting more from the government, e.g better education or better roads. This may lead to an increase in governemnt spending, incurring a great opportunity cost.
what are 3 ways that economic growth effects current and future living standards. (positive)
what is a disadvantage of economic growth on the current and future living standards.
-one way is that economic growth will result in lower poverty levels. This is due to n increase in demand, leading to an increase in production, which derives the need for labour, increasing unemployment and decreasing those that are unemployed and on benefits. More people are likely to have an increase in wages too.
-one way is that housing standards and the quality of food increases due to economic growth. Health also tends to increase, as both life expectancy and quality of life increases.
-one way is that it may trigger govrnemnt spending which will increase the livign standards both now and in the future as better educated people tend to have better living conditions
-one disadvantage is that it may lead to decreased future living standards as the environment may be exploited. A rise in incomes means more people have access to electricity and use it more freely, this causes depletion of non-renewable resources, concern about sustainability of growth for the future generations and increased levels of pollution.
