2.5.4 - The impact of economic growth

• consumer positive impact on EG

  • Wealth effect
  • lower prices and higher quality products
• consumer negative impact of EG

  • economic growth could lead to increased inequalities and so may not have any effect on the average consumer and may lead to inflation
• Firms - Negative impact on EG

  • Firms could face more menu costs as a result of higher inflation. This means they have to keep changing their prices to meet inflation.
• Firms - Positive impact on EG

  • Firms might make more profits, which might in turn increase investment.
  • Higher levels of investment could develop 2.5.4 The impact of economic growth www.pmt.education new technologies to improve productivity and lower average costs in the long run.
  • As firms grow, they can take advantages of the benefits of economies of scale
• The government - Negative impact on EG

  • Governments might increase their spending on healthcare if the consumption of demerit goods increases.
• The government - positive impact on EG

  • The government budget might improve, since fewer people require welfare payments and more people will be paying tax.