Understanding the Four Factors of Economic Growth

Economic growth refers to a long-standing extension of the prolific prospective of the financial system of a firm or a country. Improved living standards and increase in employment should be among the benefits of a well-put economic growth. Major factors based on supply, demand and efficiency, are the main determinants of an elaborate financial system. This paper attempts to describe the above three components in relation to development of the financial system of a firm or a country.

On the basis of supply, expansion of the economy is determined by several aspects, which include the accumulation of resources, industrial growth, innovation, the magnitude and excellence of man power. These features alter the substantial and technological productivity hence, facilitating the development of an economy’s latent GDP.

Demand implies the capability or the readiness to purchase a certain article of trade within a given period. It is a rapport between cost and the amount demanded with all the conditions unvarying. Being another component of fiscal enhancement, the aspect of demand majors on attaining increased output brought by flexible features like trade and household. The government should, therefore, promote its economy through buying goods and services produced. It also ensures full utilization of capital in innovative production by regulating any increase in unproductive inventions. It also maximizes entire expenditure in order to reach notable profits in the course of production.

 On the other hand, efficiency is the contrast between the definite productivity and what the same resources would have given out if differently utilized. In order to attain a desirable effectiveness and complete employment in the economy, efficiency must be enhanced. This would be realized through adapting ways to minimize the cost of production on resources with an aim of maximizing the profit.  This is best known as prolific efficiency. Proper distribution should also be employed so as to allocate a helpful mixture of commodities to capitalize on good and affordable living standards on people.  

Therefore, these three elements, demand, supply and efficiency are crucial for fiscal growth as they inter-relate to bring mutual development in any economy.

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