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1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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Trade-off between economic growth and sustainability

There is an inherent trade-off between the simultaneous pursuit of both economic growth and environmental sustainability.  The more governments or businesses pursue ‘growth’ strategies, the less likely it is that the environment will be maintained in its current form, leading to environmental damage and/or resource depletion that may be difficult or impossible to reverse.  In contrast, the more concern and attention given to the environment, the greater is the likelihood of constraints being placed on businesses, which has a negative effect on economic growth.  

The trade-off is ever-present in the minds of governments and business who need to carefully manage the demands and expectation of many stakeholder groups, such as unions and environmental groups.  For example, logging businesses will be keen to extend their reach into new areas.  They will tend to be supported by unions who are seeking to promote the interests of their members (i.e. workers in the logging industry).  However, they will often be opposed by environmental groups who are concerned about resource sustainability and the general environmental impact of increased logging activity.  The trade-off is clearly present - allow more logging of forests and we run the risk of depleting our natural resources. Prevent the logging and we run the risk of reducing economic growth and creating additional unemployment.  

It is for these reasons that large scale projects that have the potential to encroach on the natural environment, or to deplete our resources, will undergo environmental impact studies.  These studies seek to weigh up the costs and benefits of any proposal, which inherently involves an examination of the trade-off between economic growth and environmental sustainability.

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