1. Warm-up
How is economic growth and development like a baby’s growth and development?

2. Economic Growth and Development
A Comparison/Contrast
IB Economics
Section 4.1

3. Growth
Economic:
Baby:

4. Development
Economic: *
Baby:

5. Therefore . . . Development is much broader concept than growth
Decrease widespread poverty
Raise living standards
Reduce income inequality
Increase employment opportunity
Growth enables development

6. GROWTH: Two ways for GDP to grow, actual and potential.
Actual Growth
Point A:
Points B & E:
Points D & C:
Point A to Point C:
Point F: B F C
Manufactured
goods D A E
Agricultural
goods

7. 2nd Way to measure growth
Potential Growth
Point F
Curve I
Curve II
Potential
Growth F
Manufactured
goods I II
Agricultural
goods

8. Calculating Economic Growth
Economic Growth can be defined as an increase real GDP per capita over time.
Country
Name
Yr 1 GDP nominal
Year 2 GDP nominal
Economic growth
Real Growth (assuming 7.5% inflation)
Increase in Real per capita output (assuming 2% pop growth)
Fictoria
100m
110m
10%
2.5%
.5%

9. RULE OF 72 . . . Doubling Time Magic . . .
Rule: 1% will double every 72 years
If any variable grows at 1% per year it will double in size in approximately 72 years.
Example: 2% growth will double in 36 years
Formula: 72 divided by growth rate = Doubling time

10. Economic Growth With Development
Here, growth has gone
toward producing goods
and services used
by the poor. Eg; food
clothing, elementary
schools, radios, bikes
Luxury goods
And services II I
Necessities

11. Economic Growth Without Development
Benefits of growth all go to rich.
Unequal income distribution
creates this situation. Demand
is determined by income, there-
fore their purchases will determine
a large portion of the production
Example: luxury homes,
restaurant meals, luxury autos.
Luxury
Goods
And
Services II I
Necessities

12. Qatar
Watch film for evidence of economic growth and economic development
60 Minutes clip