Potential growth
Definition. Potential growth is an increase in the productive capacity of an economy, meaning the maximum output it can produce when resources are fully and efficiently employed. It results from increases in the quantity or quality of factors of production, such as more labour, investment in capital, or improved technology.
Potential growth is shown by an outward shift of the production possibility curve or a rightward shift of long run aggregate supply, in contrast to actual growth, which uses existing capacity more fully.
This term belongs to The Production Possibility Curve in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
Want to use potential growth for marks in the exam? Learn it in class or message the team.