Explain the factors that influence an economy’s standard of living and examine how technological advancements can enhance it.
Singapore has been driving growth through technology, but this has led to a rise in structural unemployment and income inequality due to the disruption of traditional industries.
a. Explain the factors that influence an economy’s standard of living and examine how technological advancements can enhance it. [10]
Introduction
Economic growth is a key objective for many economies, and Singapore has been actively pursuing growth driven by technological advancements. While improvements in technology can enhance the standard of living, they can also contribute to structural unemployment and income inequality, particularly when traditional industries are disrupted. The standard of living of an economy is determined by both material and non-material factors, and technological progress can play a crucial role in improving these aspects.
Factors that influence SOL
One of the primary determinants of the standard of living is the material standard of living, which is largely influenced by purchasing power. Individuals with higher purchasing power can afford more goods and services, enhancing their material well-being. A common measure of purchasing power is GDP per capita, which reflects the average income of individuals in a country. However, the cost of living must also be considered, as it affects the real purchasing power of income and determines the actual affordability of goods and services.
Beyond material well-being, the non-material standard of living is also essential in assessing the overall quality of life. One critical factor is the accessibility of healthcare, which determines whether medical services are readily available and affordable for the population. Access to affordable healthcare can increase life expectancy and improve the overall well-being of individuals, thereby enhancing their non-material standard of living.
Another crucial determinant is the accessibility to quality education. When citizens have access to affordable and high-quality education, they are better equipped with the skills and knowledge required for future job security. This not only improves their material standard of living through higher potential earnings but also contributes to non-material well-being by increasing life satisfaction and social mobility.
How technological advancements can enhance it
Technological advancements can significantly enhance the standard of living by driving higher economic growth. Improvements in technology lead to lower production costs, allowing firms to produce more goods and services using the same amount of inputs. This increases the productive capacity of the economy, shifting the Long-Run Aggregate Supply (LRAS) curve to the right. As a result, potential economic growth rises, leading to higher real national income (NY). With increased incomes, citizens experience greater purchasing power, which enables them to buy more goods and services, ultimately leading to an improved material standard of living.
In conclusion, the standard of living of an economy is determined by both material and non-material factors, including purchasing power, access to healthcare, and quality education. Technological progress contributes to higher economic growth by increasing productivity and real national income, which in turn enhances the standard of living. However, while technology-driven growth offers numerous benefits, it is also essential to consider its potential downsides, such as structural unemployment and income inequality, to ensure inclusive and sustainable development.
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