4.7 Defining development, sustainable development

Economic growth

Increase in real output of an economy over time

What causes economic growth

Increase in the Qs of the FOPs

• Natural factors (increase in the land factor of production)

  • Discovery of natural resources

• Human capital factor (increase in the Qs of labor)

  • Population growth

  • Immigration

  • More education population

• Physical capital and technology

  • Increase in production capacity

  • Improved infrastructure

• Institutional factors

  • Legal system

  • Property rights

  • Political stability

Capital widening

• Increased production as a result of an increased amount of labor

Capital deepening

• Increased productivity as a result of skilled/educated workers

Economic development

Improvement in living standards of economic well-being for population as a whole.

Sustainable development

• Meets the needs of the present without compromising the needs of future generations.

Economically developing countries

• Low living standards, low income, inequality, and poor health and education.

• Low productivity levels

• High rates of population growth and dependency burdens

• High and rising levels of underemployment or unemployment

• Dependence on primary commodities

• Prevalence of imperfect markets

• Dependence and vulnerability in international markets