Skip to main content

Capital Formation

Capital Formation >> Microeconomics Assignment

Economic growth depends on several factors. But the two most important factors that determine rate of economic growth are capital accumulation is essential for accelerating rate of economic growth. They need to build roads, factory buildings, machines and tools, tractors, means of irrigation, communication networks and transportation system. To produce more capital goods and build infrastructure, a society has to sacrifice some of its current consumptions. The same is true of making technological progress. Technological changes come from research and development that also required resources. The resources that have to be used for building and making technological advances have to come from the cutting the current production of consumer goods. In fact, the cut in the problem of capital formulation we have to construct such a production possibility curve in which on one axis capital formulation we have to construct such a production measured.

This has been done along the X-axis consumer goods and along the Y-axis capital goods are measured. If the economy is allocating the available resources between capital and consumer goods in such a way that it operates at a point A on the production possibility curve PP, it will be producing OC of consumer goods and OK of capital. Now suppose the society decides to provides more of capital goods. To implement this decision society will have to withdraw some resources from the production of consumer goods will decline. It is clear that if the economy reallocates its resources between consumer and capital goods and shifts from point A to point B on the dependence of production possibility curve PP it will now produce OK2 of capital goods and OC2 of consumer goods has to be reduced.

For poor developing countries where a large part of population is very poor it is difficult to reduce the production of consumer goods such as food and clothing to devote the resources so released for the capital accumulation. Thus the poor developing countries face the dilemma. While progress there is a urgent need to accelerate capital formulation and technological progress they are too poor to release resources by curtailing consumption.

However the evidence of the last half a century shows that with active role of government raising resources through taxes and other means and also getting foreign aid and investment some developing countries have in fact succeeded in accelerating capital formulation and achieving higher rate of economic growth.  

Comments

Popular posts from this blog

Improvement and excellence in Higher Education

A lot is varying in higher education. Most essentially, apprentice themselves are changing. Subsequent to long decades of ruling out, college access has extended opportunities for minority students, first-generation students and low-income students. In this year students are more probable to attend community college than any other postsecondary alternative and more probable to be older and living away from campus and may be joining part-time while balancing work as well as family. The symbolic picture of an 18-year-old high school graduate walking across a blossoming campus toward her dorm room no longer reflects the actuality of today’s college student. Institutions of higher education are act in response to these changes, partially by making course delivery more pliable. Technology has prepared this even further possible, introducing teaching as well as learning that is less forced by time and place. Technology is as well making new kinds of embedded assessment and adaptive curriculu...

Looking for Tutor for Homework Help

TutorsGlobe is  the best solution provider of your Homework and Assignment problems. It provides the solution of all grade academic subjects including English, Maths, Physics, Chemistry, Biology, Economics, Accounts, Computer Science, Finance, Management, Statistics etc. to university level students. TutorsGlobe  also offers online tutoring for K-6  level students to Graduation and Post graduation level students. For online tutoring you should first mail to us on given mail id to schedule your classes info@tutorsglobe.com Tutors who provide the solution, help and online tutoring as per your requirement have vast experience in this field. They solved thousand of assignment, homework questions with 100% satisfaction result within given deadline. Tutors are ready 24x7 to provide homework help and assignment solution of all grade academic subjects.               The search for Assignment/Homework solution help ends here... The Tuto...

Best Ways To Avoid Common Study Distractions

Whether you are studying for a main exam or working on a project or research paper, you know what you be supposed to be doing, right? You should be concentrating deep in a book somewhere quiet, with nothing to lure you into heading out for a gaming break or midnight snack. But then your friend comes in with a plan or a pizza to do something way more amusing than your work, and it’s over. Or maybe your roommate is studying hard and conscientious, too but that tapping of her pencil is going to drive you insane. There are thousands of study distractions that will distract you from study. When you are in trouble to handles those distractions, try these awesome tips for how to concentrate on studies or research even when you don’t want to. 1. Try not to become Multitasker Studies denote that trying to multitask, texting and listening to music while making dinner and doing some online research, it really lowers your IQ and makes the outcomes worst. To thrash t...