Role of infrastructure in the economy, Microeconomics

ROLE OF INFRASTRUCTURE IN THE ECONOMY:

Economic Infrastructure produces services that directly facilitate and are basic to the carrying out of a wide variety of economic activities. Infrastructure contributes to development both directly and indirectly. The output or the final products of different segments of infrastructure is the direct effect. Infrastructure's indirect contribution is as an intermediate input that enhances the productivity of all inputs of different sectors. For example, the quality of labour is enhanced by human capital improvements. Similarly, productivity of physical capital is improved by power and transportation etc.    

The linkages between economic infrastructure and development are as follows: 

•  Infrastructure lowers the cost of producing a given level of output or, alternatively, can increase the amount of output produced by all other inputs for a given cost.  

•  Infrastructure enables markets to work better. Transactions are made less costly and this increases the benefits  of trade. For example, advances in transport and communications have considerably lowered storage costs by permitting producers to respond rapidly to changing consumer demands even in international trade. (this  is referred to as "modern logistics management"). 

•  Unit costs tend to rise due to unreliable or inaccessible public infrastructure. Both small and big firms spend a significant portion of their expenditure on buying infrastructure services and suffer when these are not available. Electricity shortage has been a notorious constraint faced by expanding business units.  

 

Posted Date: 11/10/2012 7:30:16 AM | Location : United States







Related Discussions:- Role of infrastructure in the economy, Assignment Help, Ask Question on Role of infrastructure in the economy, Get Answer, Expert's Help, Role of infrastructure in the economy Discussions

Write discussion on Role of infrastructure in the economy
Your posts are moderated
Related Questions
meaning of opportunity cost under theory of cost

Explain three major barriers to development experienced by developing countries. Well, the scope of possible answers here is, em, wide, to say the least. The issue is not to si

what is the Theory of second best? Prove the theorem with the help of digram

Implicit in these analyses is the fact that without government we could have neither shortage nor surplus.  In large calculates, the suspicion of government is due to it has the po

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Inflation-Unemployment Trade-off under Rational Expectations : Robert Lucas (1972) pointed out another implication of the above hypothesis of adaptive expectations. Suppose in

what is the theory of Second best? Prove the theorem with the help of a diagram.


Principle Agent Problem [Dealing with hidden action] Assume that the employer (principle) wants its employee (agent) to work hard [You can safely assume that this maximizes th

who propounded the pure international theory of trade?