Answer to Question #247116 in Economics of Enterprise for Sadam Dine

Question

Define Economic growth and discuss with the factors which stimulate the economic growth and graphically explain that how economic growth affects the production possibility frontier.

Answer 1

Economic growth is an increase in production of goods and services over a period of time.

Factors of economic growth.

1.Human capital

Increase in human capital can lead to improved quality of labour force. Quality labour will then lead to growth since skilled workers are more productive.

2. Natural resources

Natural resources like oil or mineral deposits may boost a country's economic growth as this increases the country's production possibility curve.

3. Physical capital.

Invest in physical capital like factories, machinery and roads will lower the cost of productivity. This will increase output which can increase a country's GDP.

4. Populations or labour.

An increase in population ensures availability of workers resulting in a higher workforce.

5. Technology.

Technology could increase productivity thus accelerating economic growth.

A production possibilities curve measures maximum output of two goods using a fixed amount of input. Input composes of four factors; natural resources, labour, capital goods and entrepreneurship.

E-all resources are not being used

F- any point outside the ppf curve is impossible:more of both goods cannot be produced with current resources.

A- more of goods A are being produced and none of goods B are being produced.

D- none of goods A are being produced and more of goods B are being produced.