FUN - Economic Growth Lesson

Economic Growth

If businesses want to grow, they need to invest in equipment and technology. Better equipment and technology means we can produce more goods, which leads to more jobs. When an economy produces more goods and has more jobs, that economy has grown.

Like a business, you must invest in education to gain more skills, a better job, and a higher standard of living. Learning more valuable skills improve your chances to get a job that pays better. More pay means more choices and greater economic security.

Why pay for more education?

By looking at the graph above, what are two reasons why you should spend money for additional education?

Answer: You make more money with additional degrees and unemployment decreases with more education.

Specialization

Individuals and businesses specialize in order to be efficient. A business will assign a worker one task to master, while another worker tackles a different task; this was the idea behind the assembly line. Another example are doctors who choose to specialize on one part of the body as opposed to the whole body. Teachers specialize in subjects like English, Science, Social Studies, or Math.

Voluntary Exchange

By specializing in one job, you earn the income needed to purchase the goods or services you cannot do own your own. Individuals, businesses, and governments benefit from this voluntary, non-fraudulent trade. Non-fraudulent simply means you get what you paid for, not something fake or counterfeit. During the initial days of the PS5, some buyers in England received boxes filled with pet food instead of video game consoles; that is definitely not non-fraudulent trade!

Production Possibilities Curve

A production possibilities curve, or PPC, is a model that shows alternative ways that an economy can use its scarce resources. If you make more of one good, you have to make less of the other. If a PPC shifts to the right, the economy is growing; some reasons the economy is growing include more resources or better technology. When a PPC shifts to the left, the economy is shrinking or contracting; less resources, possibly caused by a natural disaster, can lead an economy to contract.

Remember the mnemonic IRDL – Increase Right, Decrease Left – to interpret a PPC shift correctly; IRDL is worth remembering for the entirety of this Economics course!

Identifying Economic Growth on a PPC Practice

Economic Growth Vocabulary Practice

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