The concepts of the economy lie in the organizational foundations of the economic activity of the whole society, the totality of relations that are formed in the system of production, distribution, exchange and consumption.
The economic environment is in constant motion and is actively influencing both the state as a whole and individual business entities. A guarantee of the effective functioning of the company is the implementation of a full analysis and accurate forecasting of trends in changes in the economic environment. Any successful organization should be able to adapt in time to such changes.
The term "economic growth" itself provides for an increase in gross national product in a certain period of time. This indicator is measured by the average annual growth rate and is expressed as a percentage.
Economic growth may bring some benefits to entrepreneurs by opening up new market alternatives in an ever-expanding economy. In an economic downturn, the company reduces its product inventory, reduces production and the number of employees. The performance indicator characterizes the economic growth of any company.
Many prominent economists ponder the question of what are the causes of economic growth, and find answers in the following factors:
- The presence of rich natural resources that have a beneficial effect on economic growth, but this is not enough, and the economies of Japan, Taiwan, Singapore, Hong Kong and Korea serve as clear evidence. These are countries in which there are almost no natural resources.
- The human factor, expressed in the presence of a human resource, which should have the basic properties - education and hard work.
- Due to its favorable geographical position, the state has the opportunity to receive additional income through the transport of goods through its territory. A striking example is the countries located on the seashore.
- Volumes of investment and capital.
- Scientific and technological progress also significantly increases the impact of science and technology on the production process.
Any society has two main ways of economic growth - it is intensive and extensive. In this article, we will pay more attention to the second type.
Extensive economic growth can be achieved through a quantitative increase in production factors while maintaining the technical base at the same level. For example, to double the volume of products manufactured at the enterprise, it is necessary to commission additional equipment, increase the number of employees and invested capital.
Extensive economic growth has been observed over long periods in the history of some states. Its duration can be determined by the amount of investment, human and natural resources. However, regardless of their volume, they still have the ability to gradually deplete. That is why it is advisable to achieve economic growth not only by the extensive method.
Extensive economic growth is the initial path to expanded reproduction. That is why it can be noted several negative properties that show the imperfection of this term (as mentioned above - natural resources are depleted over time, human resources need to be trained for more than one year, etc.).
Despite all its shortcomings, extensive economic growth is the basis for future economic development. For example, this type in the economy helps to ensure employment and reduce unemployment.