Explain how each of the following limits the economic growth of ...

[leo leo]

Explain how each of the following limits the economic growth of developing nations:
 
  (a) Insufficient capital formation
  (b) A shortage of human resources
  (c) A lack of social overhead capital

Question 2

Assume that the market for barley is in equilibrium and the demand for barley is inelastic. Predict what happens to the revenue of barley farmers if a prolonged drought reduces the supply of barley. The drought will cause farm revenue to
 
  A) fall because of the decrease in the quantity of barley sold.
  B) rise because there will be a shortage of barley.
  C) rise because the percentage increase in quantity sold is greater than the percentage increase in price.
  D) rise because the percentage decrease in quantity sold is less than the percentage increase in price.

[ryhom]

Answer to Question 1

(a) If there is insufficient capital formation, then capital stock does not grow and output in the future will be reduced. A lack of capital also reduces the productivity of labor.
(b) A shortage of human resources may be a barrier to growth because this reduces productivity. Also, foreign companies will not invest in countries that do not have a trained labor force.
(c) A lack of social overhead capital makes countries less able to attract private investment. A lack of social overhead capital also increases the difficulty of transporting food throughout the country, which worsens the food shortage.

Answer to Question 2

D