2.5.4 Impact of economic growth

CONSUMER- BENEFITS

• increase in demand for housing as people have more money so can afford to buy properties- will increase house prices

• shares are likely to increase in value as businesses are making more money and future prospects are good

• rising prices of shares and housing will increase wealth and lead to positive wealth effect

• improved productive efficiency due to better tech could lead to lower prices or higher quality goods

• some argue that increased economic growth will lead to increased happiness- not necessarily the case

CONSUMER- COSTS

• could lead to increased inequalities and so may not have any effect on the average consumer and may lead to inflation, which has negative effects for consumers

FIRMS- BENEFITS

• investment will increase since businesses are more successful- will have more money to invest and more incentive to invest as they will know they can make money from their investments

• business confidence will improve as there are potential demand increases for businesses’ products and this confidence will also lead to increased investment

• as a result of increased investment from both businesses and govs, tech will improve

• there will be more research and development done to invent more tech- likely to increase productive efficiency and lead to lower costs

• combination of higher demand and lower costs is likely to lead to higher profits

• economic growth also provides opportunity for new firms to establish themselves and allows existing ones to make more profit

FIRMS- COSTS

• firms who sell inferior goods (with negative income elasticities) may lose out

• changing techs and globalisation also mean that some firms find their markets disappearing e.g. DVD rental stores

GOVERNMENT- BENEFITS

• tax revenues will rise as more g and s are being bought, more income is being earnt and more profits being made

• means the gov has more money to put into the NHS, education, benefits etc.; quality of these systems will be improved, and this will help to improve living standards

• can help to reduce budget deficit, perhaps even bringing about a budget surplus which would allow money to be saved for future recessions

GOVERNMENT- COSTS

• means people expect more from gov i.e. better education, better roads etc.

CURRENT AND FUTURE LIVING STANDARDS- BENEFITS

• result in lower poverty levels

• increase in the production of g and s will increase jobs so less unemployment and less people on benefits

• wages likely to increase

• housing standards and quality of food increases

• health usually increases: life expectancy rise and higher quality of life in old age

• increased gov spending will lead to improved living standards now and future, as better educated people usually have higher living standards

• EG is likely to have highest benefits in developing countries

• could be argued that people w/ higher incomes able to buy cleaner fuels and richer countries can devote resources for research and development of cleaner resources and ‘greener’, more efficient tech

• higher income households tend to have less children which lowers natural rate of population growth, meaning less resources needed for future

CURRENT AND FUTURE LIVING STANDARDS- COSTS

• could be decreased future living standards bc of exploitation of env

• rise in income means more people have access to electricity etc. and use it more freely

  • causes depletion of non-renewable resources, concern about sustainability of growth for future gens and increased levels of pollution/waste/congestion

• EG may result in increased inequalities

  • rich may be only ones that gained from EG and may even lower the living standards of poor by exploiting poor