Economics Study Set 18

Answer:

An entrepreneur must find ways to bring practical application to the scientific knowledge in order to introduce a new innovative product.
In other words, an entrepreneur must use his or her brain power to bring in a new innovative product to the market.
If the new product creates that much value to the consumer that it exceeds the opportunity cost of producing that good and generates economic profit, in that case the new product will be successful, otherwise not.
Innovation results in refinement of production process, reduction in cost of production, improvement in quality of products.
In a nut shell, innovation enhances the production possibilities of an economy. Enhancement of production possibilities of an economy means economic growth. So, in this way, innovation is an important source of economic growth.

Answer:

If we compare the availability and variety of goods today with those in the past then clearly today we not only have higher availability but also more variety.
This has resulted in an increase in per capita availability of goods coupled with enlarged bundle of goods per person.
Increase in per capita availability of goods means increase in standard of living.
Apart from this, many newly available goods like dishwashers, mobile phones, microwaves etc. have made our life easier by making our work much simpler and easy to execute.
All this has resulted in an increase in consumer welfare.
The GDP growth figures do not capture the impact of the increased diversity because GDP growth figures depend on the GDP of respective years and does not take into account the basket of goods comprising the GDP.
Secondly, GDP growth figures simply state the availability of more goods and services per person in quantitative terms but do not state anything about the composition.
So, GDP growth figure simply state that availability of goods per person has increased but does not specify whether this increase is in terms of availability of larger variety of goods or in terms of previously available goods but in larger quantities.

Answer:

Trade expands the size of market available to the country. This expansion of market enables the producers to benefit from economies of scale resulting in lower cost of production and larger output.
Secondly, trade enable a country or region to exploit its comparative advantage and produce goods which it can produce at lower opportunity cost and exchange with goods in production of which it does not have comparative advantage.
In this way, region or economy concerned would not only be producing more but consuming more and that also the variety of goods.
More production and more consumption coupled with availability of variety of goods and services imply economic growth and higher income levels.
Thus, in this way, trade is an important source of economic growth and higher income level.
Entrepreneurial discovery is an important source of economic growth and higher income levels in the sense that entrepreneurs are the ones who organize the production process by combining the factors of production.
When entrepreneur combines the scientific knowledge with practical application and discovers the better ways of organizing the production then such discoveries, innovations or technological advancement results in higher production, lower cost per unit, and new and improved production.
This results in better utilization of resources and thus increases the value of resources.
More production in efficient manner with new and improved production methods means economic growth and higher and improved living standards - a synonym of higher income levels.
Investment is an important source of economic growth and higher income level in the sense that investment in both physical and human capital expands the productive potential of workers.
As workers became capable of producing more and that also in efficient manner, total production in the economy also increases.
Apart from this, productive and efficient workers command higher wages so income levels will also increase.
Thus, investment not only stimulates production resulting in economic growth but also leads to achievement of higher income levels.