Why and How Nationwide Economy Increase Reshape the Consumption Structure of Society - Research Paper Example

Introduction

The economy of a nation or region is a large set of inter-related activities of production and consumption that assist in determining the way scarce resources are distributed. The economy comprises of all the activities that are linked to the production, consumption and trading of services and goods in a specific region. As such, it is applicable to everyone from people to agencies like governments and corporations. A specific nation or region’s economy is governed by the history, laws, geography, and culture, among additional factors, and it shifts because of the necessity. As a result, no two economies are similar. The economy of a country is shown in many different ways such as the GDP of that country and the total value of import or export.

Purpose of the Research

The purpose of the research paper is to determine how people react to an economic shift. The economic shift affects many people as the price of commodities and their income changes with the situation in the economy. The study will identify the effects of an economic shift in different countries across the globe.

Research Questions

• In which aspect will the economy have an influence on people's consumption?
• Is the appearance of this effect same in different countries worldwide?

Definition of terms

Economy

This is a large set of inter-related activities of production and consumption that assist in determining the way scarce resources are distributed.

Inflation

This is the sustained increase in the overall level of prices for services and goods, measured as the increase in annual percentage.

Consumption

This is the value of services and goods that bought by people.

Gross domestic product (GDP)

This is the fiscal value of every finished services and good produced within the borders of a nation in a particular time period.

Literature Review

The impacts of the economic growth of a nation on the social structures have been broadly discussed in recent literature. The association is somewhat non-linear, and it is dependent on several characteristics of a nation, including institutional and policy variables. The growth in the economy has similar effects on the people's income and welfare. On the other hand, economic growth favors the expansion of several distinct socio-economic groups in relation to others (Creasey, 2012).

The link between economic development and the inequality when it comes to distribution of economic resources and income has been attracting the interest of the economists. The more economically developed nations have reduced inequality. As such, more people are able to live above the poverty line. Analysis by Kuznets suggested that income inequality in the poorer nations was the temporary phase that reverses itself the moment nations become more economically developed (Creasey, 2012). Several economists speculated that the income inequality in nations that are less developed economically was optimal for development since it signified that the nation’s economy was producing selective people wealthy enough to offer savings required for investment-led development.

The consumption patterns instigated by the present growth-based economics endorses the production and purchasing of increased material, satisfaction and wealth. The levels of consumption of individuals across the globe are not similar. The wealthy individuals are capable of influencing the economic situations to be beneficial to them and sustains poverty and dependency in the poorer countries. For instance, if nations with increased populations like China follow the models of consumption used by the wealthy countries, then there could be a considerable effect on the planet due to people using its resources.

Lack of economic growth leads to income inequality, which might hinder the capacity of the talented but poor people to access credit or other opportunities, dampens the demand, leads to instabilities, and undermines the incentives of working hard, leading to declining in the economy. Increased inequality might also generate the relatively larger groups of low-income people that have limited abilities to invest in their education, training, and health, thus hindering the development of the society.

If a specific section of a population is living in absolute poverty, the economic increase allows individuals to have increased incomes and thus, they have the capacity to attain the basic requirements of life like shelter and food. This leads to a healthy, content nation. The moment economic growth is able to conquer this form of poverty; there can be a clear association to enhanced standards of living among the people. However, when there is a small increase in the income of individuals, the enhancement in the people’s living standards can be difficult to justify. The fading marginal utilities of wealth and income is a popular concept of the economy, suggesting the tenth unit of the goods will provide limited satisfaction to the people compared to the first. Normally, as the economic growth raises the incomes, individuals mostly save their money, simply since they have a hard time finding anything significant to purchase or spend their money (Witt, 2001).

There have been instances of increased criminal and social issues as a result of economic growth. As the incomes are increasing and people are living better lives, there has been the upsurge in criminal activities. As the economy grows, there are still those individuals that cannot afford the inflation of goods and services. Also, crime can be motivated by envy. One of the reasons why the crime rates rise in a developed economy is because of the presence of items to steal. More people buy things, which increases the theft cases. However, there has been evidence that the link between crime and economic growth is not absolutely based on the US statistics, where crimes have reduced.

Research established that the economic growth is connected to the ‘marketization’ of the societies. There is a development of the market for covering the increased share of every transaction. Among the most vital differences between the sectoral shifts identified in the developed nations and in the less developed and middle-income nations is not just the nature of the areas included but also the level of the society’s market integration (Witt, 2001). The sectoral shifts during the early economic growth stages occur within the markets that seem to be operating very poorly. As such, they tend to have a robust effect on the society, radically transforming the income-related behaviors and relative income levels. During the later development stages, the markets operate optimally, and the sectoral shifts occur smoothly.

At this limit, several sectors might end up losing weight so as to favor of the others with just small variations occurring in structures of the earnings and with the associated social features. With this form of market integration, the impending problem is the pace of adjustments to development, meaning whether the demand structure for the productive factors transforms rapidly compared to the supply of such factors, transforming in one direction or the other, the structure of the rewards of such factors. Therefore, the economic development in the market integrated economy tends to have the social consequences being diverse from the less integrated economies. With the first case, the economic development might occur in the form of a ‘balanced' way with no marked effects on the social structures and, particularly, on the distributions of the well-being in the population.

Methods

In this research, the data used was obtained from the library books by considering the diverse economic concepts. Also, most of the information was obtained from journals accessible on the internet. The key words used were those related to economic growth and its effect on the consumption of individuals.

Conclusion

Improving the rates of economic growth has been considered as the holy grail of the politics and conventional economics. To an extent, the majority of industrialized economies seem to have been very prosperous in maximizing the economic outputs. However, the effects of the increase in the economy have been debatable based on if it increases or limits the standards of living of people in both undeveloped and developed nations. It has been hard for the economists to present concrete evidence of economic growth being a key factor in increasing the income and contentment of the population. However, it is vital to consider that economic growth presents various positive effects to a nation in terms of the market, the income of the people and its sustainability. Increased prosperity in a highly stable population might end up rapidly increasing the environmental impacts compared to rapidly increasing the numbers of extremely poor individuals. Therefore, in a bid to increase the economy of a nation, it is best to consider protecting the resources to avoid their depletion.