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Chapter 22: Problem 8

More people in high-income countries than in lowincome countries tend to believe that rapid rates of economic growth are not desirable. Recall the concept of a "normal good" (see Chapter 3). Does this concept provide insight into why some people in high-income countries might be more concerned with certain consequences of rapid economic growth than are people in low-income countries?

Short Answer

Expert verified
Yes, the concept of 'normal good' provides insight into why people in high-income countries might be more concerned with certain consequences of rapid economic growth than people in low-income countries. People in high-income countries may view non-material aspects like environmental quality as 'normal goods' and hence, may not desire rapid economic growth that could potentially harm these 'goods'. Conversely, people in low-income countries, for whom basic material goods are 'normal goods', might desire rapid economic growth to increase their consumption of these goods

Step by step solution

01

- Understand the Concept of 'Normal Good'

A 'normal good' is a good that sees an increase in its demand as the income of individuals increase.
02

- Relate 'Normal Good' Concept to High-Income Countries

In high-income countries, people's basic needs are generally met due to higher incomes. Therefore, they may consider aspects like clean environment, social equality, and other non-material gains as 'normal goods'. Their demand for these non-material 'goods' increases with their income.
03

- Relate 'Normal Good' Concept to Low-Income Countries

In contrast, people in low-income countries often struggle to satisfy their basic needs. Thus, they may consider actual material goods as 'normal goods' and would desire rapid economic growth to increase their incomes.
04

- Conclude by Linking Economic Growth Desirability to 'Normal Good'

Since people in high-income countries value non-material 'goods' more, they might not desire a rapid rate of economic growth due to its potential negative effects on these non-material 'goods'. However, people in low-income countries desire rapid economic growth because it may result in increased consumption of actual goods, which are their 'normal goods'

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Most popular questions from this chapter

In an interview with the Wall Street Journal, Prime Minister Narendra Modi of India stated, "In two years, we have done a lot to position India to thrive in the changing world." He mentioned that under his administration, restrictions on foreign investment into India have been loosened. Why would loosening restrictions on foreign investment help position India to thrive? Briefly explain.

Can economic analysis arrive at the conclusion that economic growth will always improve economic well-being? Briefly explain.

Writing in 2016 , economist Robert Gordon of Northwestern University stated his views of the effects of information technology on the economy: We don't eat computers or wear them or drive to work in them or let them cut our hair. We live in dwelling units that have appliances much like those of the \(1950 \mathrm{~s}\), and we drive in motor vehicles that perform the same functions as in the \(1950 \mathrm{~s}\), albeit with more convenience and safety.... Most of the economy has already benefited from the Internet and web revolution, and in this sphere of the economic activity, methods of production have been little changed over the past decade \(\ldots .\) The revolutions in everyday life made possible by e-commerce and search engines were already well established [by 2004]. If Gordon's observations about the information revolution are correct, what are the implications for future labor productivity growth rates in the United States?

(Related to the Apply the Concept on page 742) In his book The White Man's Burden, William Easterly reported: A vaccination campaign in southern Africa virtually eliminated measles as a killer of children. Routine childhood immunization combined with measles vaccination in seven southern African nations starting in 1996 virtually eliminated measles in those countries by \(2000 . \mathrm{A}\) national campaign in Egypt to make parents aware of the use of oral rehydration therapy from 1982 to 1989 cut childhood deaths from diarrhea by 82 percent over that period. a. Is it likely that real GDP per capita increased significantly in southern Africa and Egypt as a result of the near elimination of measles and the large decrease in childhood deaths from diarrhea? If these events did not increase real GDP per capita, is it still possible that they increased the standard of living in southern Africa and Egypt? Briefly explain. b. Which seems more achievable for a developing country: the elimination of measles and childhood deaths from diarrhea or sustained increases in real GDP per capita? Briefly explain.

(Related to the Apply the Concept on page 742) Economist Charles Kenny of the Center for Global Development has argued: The process technologies-institutions like laws and inventory management systems that appear central to raising incomes per capita flow less like water and more like bricks. But ideas and inventions \(-\) the importance of [education] and vaccines for DPT - really might flow more easily across borders and over distances. If Kenny is correct, what are the implications of these facts for the ability of low-income countries to rapidly increase their rates of growth of real GDP per capita in the decades ahead? What are the implications for the ability of these countries to increase their standards of living? Briefly explain.
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