The benefits of economic growth

Economic growth is desirable because it generates benefits for consumers, producers and society:

Economic growth means the productive capacity of the economy has risen.

1. This means a higher level of output of good and services. This can be illustrated by an increase in the production possibility frontier.

2. This means that the supply of capital good has risen and this will result in more consumer goods being available.

3. This will create more jobs in the economy leading to higher wages, salaries and consequently living standards.

4. Technological improvement will result in better quality goods at cheaper prices.

5. Consumers will have more disposable income to spend on consumer durables such as property and services.

6. Higher tax revenues for the state will allow higher spending on merit goods such as health and education.

7. Growth encourages further increases in enterprise and investment.

8. Firms benefit from higher profits which can be used to finance new investment.

Therefore economic growth leads to higher levels of output, employment, wages, profits and living standards.

Government benefits from higher tax revenues leading to better public services such as health and education.

	Created by Amardeep Kumar over 9 years ago

A levels Economics (Module 2: The National and International Economy) Note on Economics - Module 2 - Unit 1, created by Amardeep Kumar on 26/03/2015.