INDICATORS OF GROWTH AND DEVELOPMENT — Economics STD 12 Commerce — Question
Gujarat BoardEnglish MediumSTD 12 CommerceEconomicsINDICATORS OF GROWTH AND DEVELOPMENT5 Marks
Question
What is Economic Growth? Explain economic growth as per production function.
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Answer
$1.$ Introduction:
Normally there is no difference between economic growth and economic development but in reality there is a difference between them.
Economic Growth is related with developed countries while economic development is related with developing countries.
$2.$ Meaning of Economic Growth:
Growth means economic growth.
Economic growth relates to the long run increase in the total output of an economy.
In economic growth there is continuous increase in the real national income and per capita income.
Such growth is possible due to the supply of factors of production like land, capital, labour and entrepreneurial ability and increase in their productivity.
The following factors are included in economic growth:
$(I)$ Real national income and real per capita income.
$(II)$ The supply of production and their productivity continuously increase and production increase depends on Technology.
$(III)$ The peeple or society also change as per technological changes.
$(IV)$ Economic Growth only depends on increase in per capita income and not for distribution of per capita income.
$(v)$ Economic growth is self activated.
In short, it can be said that the supply of factor of production, their availability to increase leading to a continuous increase in real national income and real per capita income Thus economic growth is a quantitative change. Economic Growth shows the increase in output and gross national output through which a country's economic status is depicted.
It also helps in a comparative evaluation of economies of two countries.
$3.$ Production function of Economic Growth:
The increase in production of any country depend on many factors.
It is difficult task to differentiate them. The production function is as under:
Here, $Q = F(L, K ,Lb, T.....)$
$F =$ Function,
$L =$ Land
$K =$ Capital
$Lb =$ Labour
$T =$ Technology and other factors
If any developing country‘s real national income increases continuously, then it converted in to Economic Growth.
$4.$ Definition of Economic Growth:
"Economic Growth refers to growth rate of national income or rise in total quantum of Goods and Services."- Prof. Hansen.
“A long term increase in capacity of a country to supply diverse economic goods to its people is known as Economic Growth."-Simon Kuznets.
$5. $ Limitation of the concept of Economic Growth:
$(1)$ Only quantitative changes are taken into consideration in economic growth.
$(2)$ In economic growth, there is a rise in national income and per capita income but institute and psychological factors remain same.
$(3)$ The concept of economic growth is too narrow and depicts only the rise in the rate and extent of output.
$(4)$ The concept of economic growth is not of much in use to understand the welfare of the people.
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