Q-1 = Define economic development. Explain factors/determinants responsible for economic development.
DEFINITION OF ECONOMIC DEVELOPMENTEconomic development means increase in output of goods and services in an economy. Economic development is more important than economic growth because economic development is wider and more comprehensive process than economic growth. Economic development is a process of economic transition involving structural transformation of an economy through industrialization, raising gross national product and per capita income. Economic development is a qualitative terms because it indicates continuous increase in the real national income and structural changes in the economy of a country.
FACTORS RESPONSIBLE FOR ECONOMIC DEVELOPMENT Factors, which are necessary for economic development, are economic factors and noneconomic factors. Both of these have been further divided into many sub-factors. Economic development of a country is not possible without these factors.
ECONOMIC FACTORS1. Nature resources 2. Capital formation 3. Specialization 4. Technology 5. Transport and communication 6. Entrepreneurship
NON- ECONOMIC FACTORS1. Social values, attitudes and attitudes 2. Political stability 3. Administrative efficiency 4. Economic freedom 5. Right of private property
1. NATURAL RESOURCESNatural resources are one of the three main factors of production the other two are labor and capital. Natural resources include area of land, forests, rivers, climate and mines. If a country is rich in better quality of all natural resources, it will develop economically at a fast speed.
2. CAPITAL FORMATIONIt is the process of adding net physical capital stock of an economy. Capital formation creates productive potential for future production. Capital formation has three stages namely (1) savings, (2) financial institutions and capital market for mobilization of savings and (3) act of investment in machinery and buildings.
3. SPECIALIZATION Output is greater as a result of specialization. Specialization enables an economy to use its scarce resources more efficiently, thereby producing a larger volume of goods and services. It increases the rate of economic development of a country.
4. TECHNOLOGYInventions and innovations reduce the manufacturing and distribution costs. Technological progressiveness serves to change cost conditions in the long run; thus technological changes play an important role in economic development.
5. TRANSPORT AND COMMUNICATIONEfficient communication facilities increase the production capacity of all the sectors of the economy. It reduces cost of production, increases mobility of goods within & outside the country.
6. ENTREPRENEURSHIP If an entrepreneur is capable, skillful and trained then out put of his organization will be greater. Entrepreneurship results in the introduction of new type of output, new techniques and new sources of supply of inputs for business and industry.
1. SOCIAL VALUES & ATTITUDES It includes culture, religion, and life style of people of a society. Some societies are orthodox and do not like material approach of life. Religion does not allow them to keep busy day in and day out for their material prosperity. Most societies believe in festivals and different cultural ceremonies. They do not prefer to save money; hence savings rate reduces too much. In such societies material gains are not appreciated. Prof. Myrdal in his book ‘Asian Drama” has said that Asian countries should modernize their values for rapid economic development and progress in their countries
. 2. POLITICAL STABILITY Strong and stable Governments can prepare five-year development plans, can enforce monetary and fiscal policies and change social attitudes and institutions, which may be progressive one. The frequent changes in Government setup results in the lack of concrete economic policy decisions.
3. ADMINISTRATIVE EFFICIENCYEducated, trained, skillful, and hardworking Government officers can push the development of a country at a very fast speed, whereas weak and untrained administration of a country retards the economic growth.
4. ECONOMIC FREEDOMPrivate ownership of resources and maximum freedom to deploy these resources in line with profit signals create strong incentives to work hard. If every body is allowed to participate in economic activity then due to competition the rate of economic development will increase.
5. RIGHT OF PRIVATE PROPERTY Private ownership of the means of production results in the increase in supply of goods and services. In order to own and accumulate profit and property, people work hard, thus trade and business activity flourishes.
DEFINITION OF ECONOMIC DEVELOPMENTEconomic development means increase in output of goods and services in an economy. Economic development is more important than economic growth because economic development is wider and more comprehensive process than economic growth. Economic development is a process of economic transition involving structural transformation of an economy through industrialization, raising gross national product and per capita income. Economic development is a qualitative terms because it indicates continuous increase in the real national income and structural changes in the economy of a country.
FACTORS RESPONSIBLE FOR ECONOMIC DEVELOPMENT Factors, which are necessary for economic development, are economic factors and noneconomic factors. Both of these have been further divided into many sub-factors. Economic development of a country is not possible without these factors.
ECONOMIC FACTORS1. Nature resources 2. Capital formation 3. Specialization 4. Technology 5. Transport and communication 6. Entrepreneurship
NON- ECONOMIC FACTORS1. Social values, attitudes and attitudes 2. Political stability 3. Administrative efficiency 4. Economic freedom 5. Right of private property
1. NATURAL RESOURCESNatural resources are one of the three main factors of production the other two are labor and capital. Natural resources include area of land, forests, rivers, climate and mines. If a country is rich in better quality of all natural resources, it will develop economically at a fast speed.
2. CAPITAL FORMATIONIt is the process of adding net physical capital stock of an economy. Capital formation creates productive potential for future production. Capital formation has three stages namely (1) savings, (2) financial institutions and capital market for mobilization of savings and (3) act of investment in machinery and buildings.
3. SPECIALIZATION Output is greater as a result of specialization. Specialization enables an economy to use its scarce resources more efficiently, thereby producing a larger volume of goods and services. It increases the rate of economic development of a country.
4. TECHNOLOGYInventions and innovations reduce the manufacturing and distribution costs. Technological progressiveness serves to change cost conditions in the long run; thus technological changes play an important role in economic development.
5. TRANSPORT AND COMMUNICATIONEfficient communication facilities increase the production capacity of all the sectors of the economy. It reduces cost of production, increases mobility of goods within & outside the country.
6. ENTREPRENEURSHIP If an entrepreneur is capable, skillful and trained then out put of his organization will be greater. Entrepreneurship results in the introduction of new type of output, new techniques and new sources of supply of inputs for business and industry.
1. SOCIAL VALUES & ATTITUDES It includes culture, religion, and life style of people of a society. Some societies are orthodox and do not like material approach of life. Religion does not allow them to keep busy day in and day out for their material prosperity. Most societies believe in festivals and different cultural ceremonies. They do not prefer to save money; hence savings rate reduces too much. In such societies material gains are not appreciated. Prof. Myrdal in his book ‘Asian Drama” has said that Asian countries should modernize their values for rapid economic development and progress in their countries
. 2. POLITICAL STABILITY Strong and stable Governments can prepare five-year development plans, can enforce monetary and fiscal policies and change social attitudes and institutions, which may be progressive one. The frequent changes in Government setup results in the lack of concrete economic policy decisions.
3. ADMINISTRATIVE EFFICIENCYEducated, trained, skillful, and hardworking Government officers can push the development of a country at a very fast speed, whereas weak and untrained administration of a country retards the economic growth.
4. ECONOMIC FREEDOMPrivate ownership of resources and maximum freedom to deploy these resources in line with profit signals create strong incentives to work hard. If every body is allowed to participate in economic activity then due to competition the rate of economic development will increase.
5. RIGHT OF PRIVATE PROPERTY Private ownership of the means of production results in the increase in supply of goods and services. In order to own and accumulate profit and property, people work hard, thus trade and business activity flourishes.