Question

Discuss and explain with examples how natural resources impact the economy?

Answer 1

Economic activities contribute to the transformation of natural resources into consumable / usable products and services However, as more intense economic activity pushes up, it generates environmental disadvantages such as pollution which tends to negatively affect social welfare. In addition, the exhaustibility of natural resources imposes limitations on the degree to which intensive economic activities may be pursued.

The use of natural resources, emissions, and other environmental issues have become vital to the possibilities of long-term economic growth and sustainable development by extension. The impact on society of natural resources is as old as human activities as the world is integrating itself between nature and society. Economic activities (production, trade, and consumption) create environmental problems while the depletion of limited renewable and non-renewable natural resources poses questions about the sustainability of economic rents from natural resource extraction.

Natural resource is a key input which stimulates economic growth in the production process. However, the depleting nature of natural resources coupled with decreasing factor input returns means that reliance on the use of natural resources is not an ideal strategy for sustainable development. Heavy use of natural resources is by definition undermining sustainable growth. Natural resources have minimal direct economic usage to meet human needs but their transformation into goods and services increases their economic value to society.

Economic activities flourish with the presence of essential infrastructures and the rule of law guaranteeing intellectual rights (patent and copyright law). Moreover, the creation of human capital, which is the cornerstone on which all facets of economic development processes are hinged, needs to be nurtured by services delivered by the principles of nonprofit making. In addition, natural resource sectors, where many economic activities revolve around, need a legal and institutional structure based on clear institutional principles