COSTS AND BENEFITS OF ECONOMIC GROWTH Flashcards
What is the optimal economic growth
Cost
Increasing real income and material welfare as a benefit
There is a greater production of G&S, there is increasing real incomes, as the demand for the factors of production increase (land, labour, capital etc).
Greater employment opportunities and higher incomes leads to greater purchasing power, improved living standards, better healthcare and education.
High quality of goods and services is a benefit
Growth from improvements in resource use and efficiency. It promotes the acquisition of knowledge, skills, technological change and productivity.
Each of these leads to newer and better quality goods and services.
Is increased taxation for the government, a benefit or negative
Increased taxation for the government is a positive
Taxation from buisnesses such as
Additionally, increased consumer spending, driven by higher incomes, leads to higher sales tax revenues (increased GST revenue).
Taxation from consumers such as
With more people employed and earning higher wages, personal income tax collections rise.
Why is taxation good
Taxation is good for collective wants such as education, healthcare, parks
Is increased in leisure time a benefit and why
As a result of reduced working hours and higher incomes, people have more free time to spend on leisure activities
Is “May not raise living standards of everybody in the community at the same rate”
Can lead to income inequality where the benefits of economic growth are not spread evenly
Inflationary pressure
If our economy is close to its full capacity and if resources are fully employed this will put pressure on prices
Definition of structural change
Structural change is a significant shift in the economy’s structure, such as changes in industries or employment patterns. It often involves a transition from one dominant sector to another, like from manufacturing to services.
What is structural unemployment
unemployment
Why is structural unemployment bad
Create in disruption in some industries, leading to unemployment
Assocatied with econimcs bads as well as goods is a positive or negative
Assocatied with econimcs bads as well as goods is a negative
The bad refers to negative externality and what is a negative externality
A negative externality occurs when an economic activity imposes a cost on third parties who are not involved in the activity. This means that the producer or consumer of a good or service does not bear the full cost of their actions, leading to overproduction or overconsumption of that good or service.
