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Third, the expansion of resource capacity which accounts for potential growth does not imply an increase in actual growth as there is underemployment or unemployment which means that the production capacity has not increased in the short-run.This will mean that the production capacity is unable to produce more goods and services to satisfy the excessive wants.However, when we take a longer and dimensional discussion of the issue, it is quite impossible to eliminate the problem of scarcity when there is economic growth.
Actual economic growth refers to the actualization or utilization of resources into products, contributing to the growth of production capacity.
This means that the level of national income has increased and this is represented by the movement of the production level within the PPC to the production level on the PPC.
Second, market imperfection and inefficiency will occur which may lead to misallocation of resources which implies that some of the resources are not able to create the optimal level of production to meet the rise in demand.
Furthermore, the lack of perfect market information and lack of mobility in the distribution of resources and goods and services will mean that some groups of people in the economy may not be able to attain the resources and goods and services and thus, the problem of scarcity continues to prevail.
Lastly, economic growth will not solve the problem of scarcity as long as the production has not attained pareto optimality whereby there is an increase in production of one goods without the reduction in another good.
In the economic production condition where opportunity cost occurs when production of increases, the problem of scarcity will still exist.
Application of the concept of opportunity cost is required to answer this essay question.
Economic growth refers to the growth of the resource and production capacity which is measured in actual or potential capacity.
Initial low levels of inequality are associated with more negative elasticities of poverty reduction concerning growth.
Higher initial inequality results in less effect on poverty with an increase in economic growth.