Cambridge International AS and A Level Economics: Inclusive and sustainable growth (9708) – Revision Notes

These notes condense sections 9.2.5 and 9.2.6 of the Cambridge International AS & A Level Economics 9708 syllabus for examination in 2026, 2027 and 2028. Topic 9 is A Level content only, so AS candidates do not sit it. The study guide gives the full explanations. All figures are invented for illustration.

Useful links: the Cambridge A Level Economics hub, the printable checklist, the practice questions and the free 10-minute diagnostics.

9.2.5 Inclusive growth

Term	Meaning
Inclusive growth	Growth whose benefits are shared widely, with opportunities open to poorer households, regions and groups
Equality	Even spread of income or wealth (positive, measurable)
Equity	Fairness of the spread (normative, depends on values)
Absolute gain	Change in income in money terms
Relative gain	Percentage change in income

Impact of growth on equity and equality

Growth tends to widen gaps when	Growth tends to narrow gaps when
It is capital-intensive or rewards high skills	It creates many jobs for low-skilled workers
It is concentrated in one region	It spreads across regions
Owners of capital gain most	Pay at the bottom rises and tax revenue funds transfers
Access to education is unequal	Access to education and finance is broad

Check for inclusion in three steps

1. Work out mean growth.
2. Work out growth and absolute gain for the poorest group, and compare with the richest.
3. Compare shares: a falling share for the poorest means relative inequality has widened.

Worked reminder: quintile data

Country Delta (illustrative), average income per household in thousands:

Group	Year 1	Year 2	Growth	Gain
Poorest fifth	4.0	4.1	2.5%	0.1
Second	9.0	9.2	2.2%	0.2
Middle	15.0	15.4	2.7%	0.4
Fourth	24.0	24.6	2.5%	0.6
Richest fifth	48.0	49.7	3.5%	1.7

Total income rises from 100 to 103, so mean growth is 3.0%. The poorest fifth’s share falls from 4.0% to 4.1 ÷ 103 = 3.98%. The ratio of richest to poorest rises from 12.0 to 12.1. The poorest grow at 2.5%, below the mean, so growth is not strongly inclusive.

Policies to promote inclusive growth

Policy	Strength	Weakness
Education and training	Raises lasting earning power	Slow and costly
Progressive tax and transfers	Direct and quick	Disincentives; needs funding
Regional infrastructure	Opens markets and jobs	Large opportunity cost
Small-firm support and credit	Widens enterprise	Some failure; cost
Minimum wage, anti-discrimination law	Lifts the lowest pay; widens access	Job losses if too high; enforcement

9.2.6 Sustainable growth

Sustainable economic growth meets today’s needs while leaving future generations able to meet theirs.

Using and conserving resources

Type	Rule for sustainable use	Conservation methods
Renewable	Harvest no more than regeneration	Quotas, replanting, protected areas
Non-renewable	Any use reduces the stock	Recycling, efficiency, substitutes, slower extraction

• Markets may undervalue the future, so resources are used too fast.
• Natural capital losses are not shown in GDP.

Method: years of reserves left

• Constant extraction: years = reserves ÷ annual extraction.
• Extraction growing at rate r: cumulative use after n years = a × ((1 + r)ⁿ − 1) ÷ r where a is the first year’s use. Find the first n at which this reaches the reserves.

Worked reminder: reserves 400, extraction 16 a year. Constant use gives 400 ÷ 16 = 25 years. If extraction grows 3% a year, cumulative use is 374.6 after 18 years and 401.9 after 19 years, so the reserve runs out during year 19.

Worked reminder: a fishery

Stock 800 tonnes. Regeneration is 10% of stock a year, so 80 tonnes. Sustainable yield is 80. If fishers take 100 tonnes, stock after one year = 800 + 80 − 100 = 780. Regeneration falls to 78. After two years the stock is 780 + 78 − 100 = 758. Overfishing shrinks the stock, which cuts future regeneration and future catches.

Growth, environment and climate

Link	Chain of reasoning
Output to resource use	More production uses more energy and materials
Resource use to emissions	Fossil fuel use releases greenhouse gases
Emissions to climate	Gases build up; temperatures rise; weather risks increase
Costs	Fall on others and on future generations: external costs

Emissions intensity = emissions per unit of GDP.

Worked reminder: GDP rises 2%, intensity falls 5%. Change in emissions = 1.02 × 0.95 − 1 = −0.031, so emissions fall 3.1%. If intensity falls 1%, 1.02 × 0.99 − 1 = +0.0098, a rise of 1.0%.

Mitigation policies

Policy	Mechanism	Evaluation points
Carbon or pollution tax	Raises private cost to the external cost	Measuring the external cost is hard; regressive; revenue can be recycled
Tradable permits	Cap on total emissions; trade finds the cheapest cuts	Cap may be loose; price uncertainty
Regulation	Standards or bans	Certain outcome but inflexible
Subsidies for clean energy and R&D	Lower cost of green options	Taxpayer cost; may back the wrong technology
Public investment	Grids, rail, recycling	Cost and delay
International agreements	Share the effort	Free riding

Method: tax on a producer in a linear market

1. Find the equilibrium before the tax.
2. Replace P with (P − t) in the supply equation.
3. Solve again for the after-tax price and quantity.
4. Consumer burden = new price − old price. Producer burden = t − consumer burden.
5. Revenue = t × new quantity. Emissions change = emissions per unit × change in quantity.

Worked reminder: if a tax of 15 per unit leaves 200 units sold, revenue = 15 × 200 = 3,000.

Evaluation chains to reuse

Inclusive growth. Policy raises skills or incomes at the bottom, so the poorest share more in the gains. The effect depends on how long the policy takes, how it is funded, whether jobs exist for those trained and how the rich respond to higher taxes. A strong answer ends with a judgement about which policy matters most for the country in the question.

Sustainable growth. A policy raises the private cost of damage, so firms and households cut output or switch to cleaner methods. The size of the cut depends on elasticity of demand and supply, on the availability of substitutes, on whether other countries act too and on how revenue is used. A strong answer weighs the cost of acting now against the cost of climate damage later.

The link between the two. A carbon tax with revenue returned to low-income households can cut emissions and protect the poorest. A carbon tax with revenue spent elsewhere may protect the environment but widen inequality. Say which applies.

Worked reminder: gains from trading permits

Two firms each emit 100 tonnes. The cap is 140 in total, so the cut is 60. Firm A abates at 20 per tonne and firm B at 45 per tonne. If each cuts 30 tonnes, the cost is 30 × 20 + 30 × 45 = 600 + 1,350 = 1,950. If firm A makes the whole cut of 60 and sells its spare permits, the cost is 60 × 20 = 1,200, which is 750 lower for the same total emissions.

Must-know distinctions

• Inclusive growth is about who gains. Sustainable growth is about whether growth can continue without harm to the future.
• Absolute gain differs from relative gain. A small percentage rise on a large income can exceed a large percentage rise on a small income.
• A lower growth rate of emissions is not a fall in emissions.
• Renewable does not mean unlimited. Overuse can exhaust it.
• A tax raises the private cost. A permit scheme sets the quantity.
• Equity is normative. Equality is measurable.

Quick self-test

1. Define inclusive economic growth.
2. State one difference between equity and equality.
3. Mean income rises from 25 to 26. Calculate the growth rate.
4. Reserves are 270 and extraction is 9 a year. How many years do they last at a constant rate?
5. A forest regenerates 6% of a 500-hectare stock each year. State the sustainable annual harvest.
6. GDP rises 4% and emissions intensity falls 4%. Calculate the change in emissions to one decimal place.
7. State one reason why a carbon tax may be regressive.
8. A permit scheme caps emissions at 300 tonnes. State what firms can then do with permits.
9. Explain one limit of using subsidies for renewable energy.
10. Explain one way education spending can make growth more inclusive.

Answers

1. Growth whose benefits are shared widely across society, with opportunities open to all groups.
2. Equality is a measurable evenness of distribution. Equity is a judgement about fairness.
3. (26 − 25) ÷ 25 × 100 = 4.0%.
4. 270 ÷ 9 = 30 years.
5. 0.06 × 500 = 30 hectares a year.
6. 1.04 × 0.96 − 1 = −0.0016, a fall of 0.2%.
7. Poorer households spend a larger share of income on energy and basic goods, so the tax takes a larger share of their income.
8. Buy and sell them, so that cuts take place where abatement is cheapest.
9. Subsidies cost taxpayers money and may back a technology that does not succeed.
10. It raises skills and productivity of lower-income workers, so they can earn more and share in the gains from growth.

Where marks are usually lost

• Defining inclusive growth as faster growth rather than shared growth.
• Giving only the mean growth rate when the question asks about the poorest group.
• Mixing up absolute and percentage gains.
• Treating equity as something that can be measured by the Gini coefficient alone.
• Describing sustainability only as protecting the environment, without the idea of future generations.
• Reading a fall in emissions growth as a fall in emissions.
• Drawing a tax on producers as a shift of demand.
• Listing policies without a judgement about which is best and under what conditions.

Official syllabus

Cambridge International AS & A Level Economics 9708 syllabus for examination in 2026, 2027 and 2028, published by Cambridge University Press & Assessment (Cambridge International), sections 9.2.5 and 9.2.6.