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Natural Resources and Economic Growth

Discuss whether or not a country’s economic growth rate depends mostly on the availability of its natural resources.

Category:

Economic Growth and Development

Frequently asked question

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Answer

Plan your essay by creating a brief outline before you start writing.

The country's economic growth rate is influenced by various factors, and while the availability of natural resources can play a role, it is not the sole determinant. Here are some arguments for both sides:

Why natural resources might have a significant impact on economic growth:
➡️1. Natural resources as a factor of production: Countries with abundant natural resources can utilize them to enhance their productive capacity, leading to increased economic output and growth. Resources such as oil, minerals, or fertile land can drive sectors like mining, agriculture, or energy production, contributing to overall economic expansion.
➡️2. Impact on poverty and health: Insufficient access to natural resources like water can negatively affect living conditions, leading to poverty, ill health, and reduced productivity. Adequate availability and management of resources are crucial for sustaining economic growth and improving the well-being of the population.
➡️3. Dependence on natural resource imports: Countries lacking sufficient natural resources may face challenges in meeting their resource needs. This reliance on imports can strain the current account balance, potentially hampering economic growth. Insufficient access to critical resources required for economic sectors may limit a country's growth potential.
➡️4. Role in infrastructure and primary sectors: Natural resources are vital for the construction of infrastructure, such as roads and schools, which are essential for economic development. Additionally, primary sectors like agriculture rely on natural resources for production, and their growth can contribute to overall economic expansion.

Why natural resources might not be the primary determinant of economic growth:
➡️1. Importance of other factors of production: While natural resources are valuable, other factors like capital investment, human capital (education, skills), and technological advancements are equally important for economic growth. Countries that effectively utilize these factors can achieve high growth rates despite limited natural resources.
➡️2. Trade and resource availability: Through international trade, countries can access the natural resources they lack domestically, reducing the dependency on local availability. Global trade enables resource-rich countries to export their resources while importing others they require, mitigating limitations on growth due to resource constraints.
➡️3. Specialization and trade restrictions: Economic growth depends on a country's ability to specialize in areas where it has a comparative advantage. Trade restrictions or barriers can hinder the flow of resources and limit economic growth. By engaging in international trade, countries can overcome the limitations posed by their own natural resource availability.
➡️4. Variations in economic performance: Economic growth rates vary significantly among countries with different levels of natural resource endowments. Some resource-rich countries have struggled to translate their resource wealth into sustained economic growth, while resource-scarce countries with well-developed sectors and favorable economic policies have achieved high growth rates. Factors like governance, institutions, innovation, and investment climate play vital roles in economic performance.
In conclusion, while natural resources can impact economic growth, they are not the sole determinant. A country's economic growth depends on a combination of factors, including the effective utilization of all factors of production, trade opportunities, institutional frameworks, and policy choices. Achieving sustainable economic growth requires a holistic approach that considers the diverse factors shaping a country's economic development.

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I. 🍃Introduction
- Importance of natural resources in economic growth

II. Reasons why natural resources are important
- Boosting productive capacity
- Negative impact of lack of natural resources on poverty and productivity
- Reliance on other countries for resources
- Importance in agriculture and infrastructure

III. Reasons why natural resources may not be as important
- Other factors of production
- Trade as a means of obtaining resources
- Time-consuming process of finding resources
- Examples of countries with limited resources but high growth rates

IV. 👉Conclusion
- Importance of considering multiple factors in economic growth
- Natural resources as one of many important factors

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Up to ➡️4 marks for why they might: Natural resources are an important factor of production - Countries endowed with natural resources have a good productive capacity as a result -, boosting the growth that they can enjoy -. A lack of natural resources such as water can cause poverty / ill health -. This can harm productivity -. Countries with insufficient natural resources are reliant on other countries to provide them - worsening the current account and reducing the economic growth rate - and if a country does not have enough other resources to trade it must rely upon its own natural resources -. Natural resources are important in agriculture - countries with a lack of natural resources may not produce enough food - leading to poorer nutrition - poorer health and lower productivity -. Natural resources are essential for the construction of infrastructure e.g. roads and schools - Other economic sectors (secondary and tertiary) depend upon natural resources (primary) -.
Up to ➡️4 marks for why they might not: Other factors of production are equally / more important e.g. capital investment or education for skills -. Through trade - a country can obtain from other countries the natural resources it lacks - It depends upon what countries specialise in - and whether they face trade restrictions - if they can import raw materials from other countries their growth will not be limited -. Finding natural resources can take a long time - slowing down economic growth -. There are many countries in the world with significant natural resources but poor economic growth rates / standard of living - and many countries with limited resources but high growth rates, such as Singapore -.

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