Define the following terms:
1) Public goods are goods that when produced can be freely consumed by anyone, for example the justice system. They are made up of the following goods, non-exclusive and non-rival.
Non-exclusive goods are goods that people cannot be excluded from consuming, it is difficult or impossible to charge for its use which implies no private market as benefits cannot be denied to those who refuse to pay, for example public TV.
Non-rival goods or non-exhaustible goods are goods for which marginal cost of its provision to an additional consumer is zero which implies that the ‘allocative efficiency’ price should be zero. A private market is hardly likely to exist in the situations. An example would be defence and law.
Public goods are provisioned by the public sector mainly being funded by tax revenue and are free at the point of use.
2) Economic growth is quantitative change or expansion in a country’s economy; it is the most fundamental indicator of an economy’s health. It is measured by the annual percentage rate of change in a nation’s gross domestic product (GDP).
GDP is the economy’s total income accruing from output, the market value of all goods and services produced within an economic area during a certain period.
Positive economic growth signals a wealthier economy and increased prosperity. It means an increase in production which in turn increases profits for the production companies. This also translates to an increase in tax collection for the government and reduced unemployment levels and better prospects for the economy.
The factors affecting economic growth are technology, natural resources, more labour and government policies. Improved technology leads to increased production, efficiency and larger profits with natural resources allowing this as it offers more materials to be used. This will also improve workers production levels and finally government policies influencing...