Cambridge International as and a level Economics Ebook

Progress and development: 
Comparing the benefits and 
costs of economic growth brings out the diff erence between 
progress and development. An economy that is growing will 
be progressing in terms of higher output but it may not be 
developing if the quality of people’s lives is declining.
KEY CONCEPT LINK
Using and conserving resources
Using natural resources now can increase economic 
growth, at least in the short run. For example, cutting down 
trees in a rainforest, hunting animals in a wildlife reserve 
or increasing the amount of gas extracted from gas fi elds 
can increase output and create jobs. It can also increase 
exports and so improve the current account position 
on the country’s balance of payments. In addition, the 
higher output can increase tax revenue that can be used, 
for instance, to improve the country’s infrastructure and 
education, which can further generate economic growth.
Th
ere are, nevertheless, some arguments for conserving 
resources. For example, maintaining rainforests and wildlife 
in a reserve may encourage tourists to visit the country. 
Maintaining rainforests may also help the environment by 
absorbing carbon dioxide. Conserving resources also enables 
future generations to benefi t from them and may mean that 
they can be sold at higher prices in the future.
Th
ere are a number of factors that may infl uence 
the decision as to whether to use or conserve resources. 
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Chapter 9: The macroeconomy 

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One is consideration of whether demand for the products 
created by the resources is likely to increase or decrease 
in the future. If it is thought that demand will fall in the 
future, there is an argument for using the resources now. 
If the resources are non-renewable, it would be important 
that any revenue earned from using them now should be 
invested into developing other industries.
It may be advisable to conserve a resource if the country 
does not currently have a comparative advantage in 
producing the related product but may have in the future. 
For example, a country may have signifi cant gold deposits 
but they may currently be too expensive to extract. If a 
country has serious debt problems, it may feel forced into 
using its resource now.
It is interesting to note that the Ecuadorean government 
between 2007 and 2013 sought, unsuccessfully, to get 
individuals, fi rms and governments throughout the world 
to pay it to leave oil underground in its Yasuni National 
Park, which is part of the Amazonian rainforest. Oil 
drilling will create income and employment but will reduce 
tourism and may generate a range of external costs.