24. In countries with well-developed economies, economic growth tends to:

Question

BlackTom AI · Accepted Answer

In highly developed economies, additional GDP growth typically delivers only small marginal improvements in welfare because of diminishing marginal utility of income and saturation of basic needs.

1) Relevant concepts:
- Diminishing marginal utility: as income rises, each extra dollar yields less additional satisfaction.
- Development thresholds: once basic goods, healthcare, education, and infrastructure are largely provided, further growth mainly improves luxuries or convenience.
- Easterlin-style observations: large increases in income past a certain point produce only modest increases in reported happiness.
- Externalities and distribution: growth can be unevenly shared and may create environmental costs that offset some benefits.

2) Step-by-step reasoning:
- Start from a well-developed economy with high per-capita income and broad access to services.
- Early stages of growth convert unmet needs into major welfare gains (health, sanitation, literacy). Those gains are large per unit of output.
- After basic needs are met, additional output primarily funds nonessential goods, incremental comfort, or improved variety — smaller welfare gains per output unit.
- Empirical evidence and theory show the marginal benefits of growth fall as development increases, so overall benefits become minor relative to earlier stages.

3) (No numeric calculations required.)

4) Why the correct answer is correct:
- Option (a) “have minor benefits” matches the theoretical expectation and empirical findings: in highly developed economies, further growth often yields only marginal improvements in quality of life.

5) Why other options are incorrect:
- (b) “diminish” is ambiguous and misleading: growth itself does not necessarily diminish; rather the benefits of additional growth diminish. The option’s wording implies growth decreases, which is wrong.
- (c) “create limitless resources” is false: economic growth and technology can expand effective resources and efficiency, but they do not create truly limitless physical resources.

Conclusion: Therefore, the best choice is (a) have minor benefits, which matches the provided answer.

24. In countries with well-developed economies, economic growth tends to:Single choice

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