Question

1.Please complete the following:

a. Why are labor and financial markets critical to economic growth?

b. How does credit help an economy grow?

c. What is elasticity of supply and demand?  

Answer 1

a. Financial markets help to effectively direct savings and investment flows within the economy in ways that facilitate capital accumulation and goods and services production. The combination of well-developed financial markets and institutions, as well as a variety of financial products and instruments, is tailored to the needs of borrowers and lenders, and hence the economy as a whole.

Labor drives economic growth a highly productive economy means that with the same amount of resources, we can produce more goods or services; Or deliver the same amount of less-resource goods and services.
Everyone is influenced by labor productivity. Increased productivity brings higher profit and more investment opportunities for businesses.

b. Credit contributes to higher consumption, thereby rising economic income rates. This in turn leads to higher GDP (GDP) and therefore faster productivity growth. If credit is used to buy productive resources it contributes to economic growth and adds to income. Credit also leads to cycles of debt creation. Banks in an economy are greatly impacted by credit production. That is because their primary business is to provide loans in return for interest payments to customers. When an economic climate improves and consumers are more able to spend, credit demand increases. This is beneficial for banks, because it results in more loans being made available and an rise in interest income.

c.Price elasticity measures the responsiveness of a good to a change in its price of the quantity demanded or supplied. It is calculated as the demanded percentage change in quantity divided by the price percent change. Elasticity can be defined as elastic, elastic unit, or inelastic demand or supply curves imply that the quantity demanded or supplied is more than proportional in response to price changes. An inelastic demand or supply curve is one where a percentage increase in price would result in a smaller percentage increase in demanded or supplied quantities. A unitary elasticity means that a given percentage change in price leads to an equal percentage change in quantity demanded or supplied.