Economics: Economy: Features and Meaning of Economic Development

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Features

  • Co-existence of public and private sectors: The private sector consists of production units that are owned privately and work on the basis of profit motive. The public sector consists of production units owned by the government and works on the basis of social welfare.

  • Individual freedom: They are free to choose any occupation and consume as per their choice. But producers are not given the freedom to exploit consumers and labourers. Government puts some restrictions keeping in mind the welfare of the people.

  • Economic planning: The government prepares long-term plans and decides the roles to be played by the private and public sectors in the development of the economy.

  • Price mechanism: Prices play a significant role in the allocation of resources. For some sectors, the policy of administered prices is adopted. Government also provides price subsidies to help the target group.

On the Basis of Level of Development

Developed Economy

Developed economy is the economy where the countries having higher national and per-capita income, high rate capital formation, highly educated human resources and better infrastructure facilities. In short, developed countries have high standard of living.

Developing Economy

Developing economy is an economy where the countries are low on the ladder of development. But economists prefer to call them developing countries because it gives a sense of dynamism.

Meaning of Economic Development

  • Economic growth is a sustained increase in national income. It is reflected in the growth per-capita income (i.e. national income + total population)

  • Economic development includes not only economic growth but also various other economic changes that improve the quality of life or standard of living of people in a country.

Determinants of Economic Development

The process of economic development is influenced by a number of economic as well as non-economic factors:

Economic Factors

  • Natural Resources

  • Human Resources

  • Capital formation

  • Technology

Non-Economic Factors

  • Caste system

  • Family type

  • Racial factors

  • Government policies

Distinguish between Economic Development & Economic Growth

Distinguish between Economic Development & Economic Growth
Distinguish Between Economic Development & Economic Growth

Sr.no.

Points

Economic Development

Economic Growth

1.

Period

Short term generally year to year

Long term measure more than a year

2.

Refers to

Rise in national income and per capita income in real terms

Rise in standard of living and a better quality of life

3.

Considers

Income index does not take in account the distributional aspects of national incomes.

Besides income index some non-economic indices are also taken into account.

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