Question

How does "our stuff" or in other words phones, laptops, car parts, waste etc relate to the governmental goal of economic growth. how does it relate to externalities in production and consumption, how markets work or fail to allocate scarce resources.

Answer 1

Economic growth of the country or economy basically depends on the gross domestic product or GDP of the country. GDP is defined as the combination of all goods and services that are produced within the country.

Our stuff can be related to governmental goal of economic growth because these goods are used by the citizens of our country and they are used within the country. Thus it would increase the GDP of the country and lead to economic growth of the country. Economic growth is also enhanced by consumer spending on goods and services.

There are various conditions for efficiency which can affect economic efficiency. This can include Marginal rate of Substitution (MRS).

Consumption and production can lead to various positive and negative externalities. Positive externality can involve external benefits and negative externality can involve external costs. Example for consumption having positive externality can be vaccination as it can have positive benefit for the society whereas riding a bike which has high noise can have a external cost. Hence they both can have positive and negative externalities.

Market efficiency is achieved when the value of goods and services produced is equal to value of forgone production. Market fail to allocate scarce resources when this efficiency condition is not achieved. When scarce resources are there, then those resources are not available for consumption, which can lead to inefficiency and thus reduce economic growth.