(1-4) Factors that affect the economic growth of a country:

(1) Human Resource: Refers to one of the most important determinants of economic growth of a
country. The quality and quantity of available human resource can directly affect the growth of an
economy. The quality of human resource is dependent on its skills, creative abilities, training, and
education. If the human resource of a country is well skilled and trained then the output would also
be of high quality.
On the other hand, a shortage of skilled labor hampers the growth of an economy. Therefore, the
human resources of a country should be adequate in number with required skills and abilities, so
that economic growth can be achieved.

(2) Natural Resources: Affect the economic growth of a country to a large extent. Natural
resources involve resources that are produced by nature either on the land or beneath the land. The
resources on land include plants, water resources and landscape.

The resources beneath the land or underground resources include oil, natural gas, metals, non-
metals, and minerals. The natural resources of a country depend on the climatic and environmental
conditions. Countries having plenty of natural resources enjoy good growth than countries with
small amount of natural resources.

The efficient utilization or exploitation of natural resources depends on the skills and abilities of
human resource, technology used and availability of funds. A country having skilled and educated
workforce with rich natural resources takes the economy on the growth path.

The best examples of such economies are developed countries, such as United States, United
Kingdom, Germany, and France. However, Japan has a small geographical area and few natural
resources, but achieves high growth rate due to its efficient human resource and advanced
technology.

(3) Capital Formation: Involves land, building, machinery, power, transportation, and medium
of communication. Producing and acquiring all these manmade products is termed as capital
formation. Capital formation increases the availability of capital per worker, which further
increases capital/labor ratio. Consequently, the productivity of labor increases, which ultimately
results in the increase in output and growth of the economy.

(4) Technological Development: Refers to one of the important factors that affect the growth of
an economy. Technology involves application of scientific methods and production techniques. In

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other words, technology can be defined as nature and type of technical instruments used by a
certain amount of labor.
Technological development helps in increasing productivity with the limited amount of resources.
Countries that have worked in the field of technological development grow rapidly as compared
to countries that have less focus on technological development. The selection of right technology
also plays an role for the growth of an economy. On the contrary, an inappropriate technology-
results in high cost of production.

(5) Social and Political Factors: Play a crucial role in economic growth of a country. Social
factors involve customs, traditions, values and beliefs, which contribute to the growth of an
economy to a considerable extent.
For example, a society with conventional beliefs and superstitions resists the adoption of modern
ways of living. In such a case, achieving becomes difficult. Apart from this, political factors, such
as participation of government in formulating and implementing various policies, have a major
part in economic growth.

Economy Elements:
1-Utility: It’s the capability of the need for human desire satisfaction regardless of its necessity or
not.

2-Want: It’s the desire to satisfy human requirement whether it’s material or not or it’s the desire
that human feels to satisfy his needs.

3-Wealth: It’s the summation of things and money that satisfy human needs directly or indirectly
within certain time.

Chapter 2

(2-1) Economy Aspects:

1- Demand: It’s the requirement quantity from a certain product within certain period of time with
constant conditions.

Market demand: is the total quantity demanded across all consumers in a market for a given
good.

Aggregate demand: is the total demand for all goods and services in an economy.
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(2-2) Factors affecting demand

1. Income: The demand for goods and services also depends on the incomes of the people. The
greater the incomes, the greater their demand will be. However, the effect of change in income on
demand depends on the nature of the commodity under consideration. If a specific good is a normal
good, then an increase in income leads to rise in its demand, while a decrease in income reduces
the demand. But if the given commodity is an inferior good, an increase in incom will then reduce
the demand, and a decrease in income leads to rise in demand.

2. Prices of substitutes and complementary goods: A substitute, or substitute good in economics

is a product or service a consumer sees as the same or similar to another product. An increase in
the price of substitute will lead to an increase in the demand for given commodity and vice-versa.

3. Number of consumers: The market’s demand for a good is influenced by adding up the
individual demands of the present as well as prospective consumers of a good at various possible
prices. The greater the number of consumers of a good, the greater the market demand for it. The
increase in consumers can happen when more and more favored substitute goods than a specific
commodity. Then the number of substitute’s buyers will rise. When the seller expands to a new
market to distribute goods, or when there is a growth in the population, the demand for a specific
good can also escalate.

4. Consumers taste and preferences: Tastes and preferences of the consumer have a direct
influence on the demand for a commodity. This can be applied for products in fashion, customs,
habits, etc. For example, if a commodity in fashion is on trend and is preferred by the consumers,
the demand for such a commodity will definitely rise. On the other hand, demand for it will fall, if
the consumers have no taste or preference for that commodity.

5. Consumer’s expectation: Another factor which influences the demand for goods is consumers’
expectations with regard to future prices of the goods. If the price of a certain commodity is
expected to increase in near future, the consumer will buy more of that commodity than what they
normally buy. In that situation, they won't have to pay a higher price in the future. If the price of
petrol is expected to rise in the next few days, people will rush for fuel. Similarly, when the
consumers expect that in the future the prices of goods will fall, then in the present they will
postpone a part of the consumption of goods with the result that their present demand for goods
will decrease.