Labour, capital, natural resources, and investment are determinants of economic growth. Economic growth is achieved through population growth, investment, innovation, or education. A skilled workforce, availability of capital, and natural resources increase productivity. Investment is the ultimate determinant of economic growth, with a symbiotic relationship with other determinants.
Labour, capital, natural resources and investment are all determinants of economic growth. Economic growth is achieved when the quantity or quality of these determinants of economic growth increases due to population growth, investment, innovation or improvements in education. The above factors facilitate economic growth by increasing productivity. For example, a large and skilled workforce allows a region to produce more goods at a faster rate. Greater availability of capital, land or entrepreneurs in a given market means that more resources can be used to provide the goods and services that society wants and needs, consequently causing wages to rise and the standard of living to rise .
There are three main means of increasing the amount of work. The first is natural population growth. Immigration from other regions or countries represents the second route. The third is an increase in labor force participation rates of eligible members of the population – job quality is improved through formal education or employer-sponsored training.
Economic growth through work is achieved in several ways. A high level of employment means that companies have the workforce necessary to produce, serve and sell the goods and services required by the population. Furthermore, income levels for the whole region or country increase if a high percentage of citizens are employed. This means that consumer demand will remain constant or increasing.
One of the determinants of economic growth that increases productivity is capital. Capital goods are products, buildings, or infrastructure that are used to manufacture or supply goods and services that people require. Factories, tools, roads, and transportation vehicles represent the capital goods used by businesses to develop and distribute products and services efficiently. The availability of capital determinants of economic growth is increased by production or acquisition; the quality of capital goods has improved through technological innovations.
Natural resources are driving economic growth factors that serve as factors of production. For example, water can be used to power generators in manufacturing plants or oil can be used to power machinery used to transport goods and services to markets. Most natural resources are scarce and cannot be replenished. Consequently, the only way to increase the amount of natural resources is through exploration that discovers new sources of the resource in question.
Investments are the ultimate determinants of economic growth. In essence, investment is the conscious decision to produce capital goods rather than consume assets in exchange for future investment returns. Almost all other determinants of economic growth share a symbiotic relationship with investment.
For example, to increase the quality of the workforce, parents, government agencies and companies invest in education. To exploit natural resources, investments must be made in exploration and drilling. A novice baker who chooses to buy a capital asset like a delivery truck instead of a sports car represents one form of investment. This is because the delivery truck can be used to deliver baked goods to the customers while the sports car is a luxury item. The baker chooses to buy the delivery truck in hopes that he can increase its efficiency by carrying more products or materials.
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