Cambridge International AS and A Level Economics: Inclusive and sustainable economic growth (9708)

This guide covers sections 9.2.5 (inclusive economic growth) and 9.2.6 (sustainable economic growth) 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 countries, firms, households and numbers below are all made up, so none is a real statistic.

Start from the Cambridge A Level Economics hub or the printable checklist. After this guide, use the revision notes and the practice questions. To find your weak spots first, try a free 10-minute diagnostic. The AS ideas behind this unit are in the guide to economic growth: measurement, causes and consequences and the guide to income and wealth inequality.

What this guide covers

Outcome	What you must be able to do
9.2.5	Define inclusive economic growth; explain the impact of growth on equity and equality; explain policies to promote inclusive growth
9.2.6	Define sustainable economic growth; explain using and conserving resources; explain the impact of growth on the environment and climate change; explain policies to mitigate that impact

The syllabus does not print wording for either definition. The definitions here are standard working definitions. Other 9.2 outcomes (output gaps, the business cycle and growth policies) have their own pages and are not repeated here.

9.2.5 Inclusive economic growth

Inclusive economic growth is growth whose benefits are shared widely across society, so that poorer households, regions and groups gain a fair share of the extra income and have real opportunities to take part in producing it.

Headline growth only tells you what happens to the average. It says nothing about who receives the gain. Two ideas help you separate the two.

Idea	Meaning	Type of judgement
Equality	Incomes or wealth are spread evenly. Measured by quintile shares, ratios or the Gini coefficient.	Positive: it can be measured
Equity	The distribution is fair. People may disagree about what is fair.	Normative: it rests on values

An economy can have more equality yet be inequitable (for example, if rewards ignore effort), and it can be equitable with some inequality (for example, if differences reflect effort and skills).

Worked example 1: average growth that is not inclusive

Country Alpha (illustrative) has five equal groups of households, ranked from poorest to richest. Average income per household, in thousands:

Group	Year 1	Year 2	Change	Growth
Poorest fifth	6.0	6.1	0.1	1.7%
Second	11.0	11.3	0.3	2.7%
Middle	17.0	17.4	0.4	2.4%
Fourth	26.0	26.8	0.8	3.1%
Richest fifth	40.0	42.4	2.4	6.0%

Step 1: mean income is (6 + 11 + 17 + 26 + 40) ÷ 5 = 20.0 in year 1 and 104 ÷ 5 = 20.8 in year 2. Growth = (20.8 − 20.0) ÷ 20.0 × 100 = 4.0%.

Step 2: the richest fifth’s share rises from 40 ÷ 100 = 40.0% to 42.4 ÷ 104 = 40.8%. The poorest fifth’s share falls from 6.0% to 5.9%.

Step 3: the ratio of richest to poorest income rises from 40 ÷ 6 = 6.7 to 42.4 ÷ 6.1 = 7.0.

Step 4: the richest fifth receives 2.4 ÷ 4.0 = 60% of the total gain in income.

Judgement: average growth of 4.0% hides a poorest-fifth gain of only 1.7%. Absolute poverty may fall, because the poorest are slightly better off, but relative inequality widens. The growth is only weakly inclusive.

Impact of growth on equity and equality

Growth can widen or narrow gaps. Use these chains.

• Widening: growth driven by capital-intensive or high-skill sectors raises the pay of skilled workers and owners of capital. Workers without those skills gain little. Inequality rises, and if differences stem from unequal access to education rather than effort, equity falls too.
• Narrowing: growth that creates many jobs for low-skilled workers raises demand for labour and pay at the bottom. Higher tax revenue can fund transfers and public services. Inequality falls.
• Regional effects: if growth is concentrated in one city or coastal region, other regions fall behind unless workers move or investment follows.
• Time: a small group may gain first and gains may spread later, but this is not automatic.

Policies to promote inclusive growth

Policy	How it promotes inclusion	Main limitation
Education and training	Raises the skills and productivity of lower-income groups	Slow, costly, and results are uncertain
Progressive taxes and transfers	Redistribute part of the gains to lower-income households	Possible disincentive effects; funding limits
Regional investment in transport and broadband	Opens jobs and markets to lagging regions	Large opportunity cost; slow to complete
Support for small firms and access to credit	Spreads business opportunity beyond established firms	Some loans fail; support costs money
Minimum wage and anti-discrimination law	Raise pay at the bottom and widen access to jobs	May reduce jobs if set too high; hard to enforce

Worked example 2: the payback of a training programme

A government in Country Beta (illustrative) trains unemployed workers. The cost is 3,000 per trainee. 80% complete the course, and each completer earns 1,200 more per year. Expected extra earnings per trainee are 0.8 × 1,200 = 960 a year. Payback = 3,000 ÷ 960 = 3.1 years (3.125). Evaluate: the gain continues after the payback point, and tax receipts rise as earnings rise. But the figure assumes that completers find work. A weak labour market would lengthen the payback.

9.2.6 Sustainable economic growth

Sustainable economic growth is growth that meets today’s needs while leaving future generations able to meet theirs. A widely used version of this idea comes from the 1987 Brundtland report. Growth is unsustainable if it depends on using up resources or damaging the environment faster than they can recover.

Using and conserving resources

• Renewable resources (fish stocks, forests, solar and wind energy) regenerate. Use is sustainable if the rate of harvest does not exceed the rate of regeneration.
• Non-renewable resources (oil, coal, minerals) are finite. Any use reduces what remains. Conservation means slower extraction, recycling, substitutes and efficiency.
• Market prices may not reflect the cost to future generations or to people outside the market. Resources are then used too fast. This is a market failure (externalities and the failure to value the future).

Worked example 3: how long do reserves last?

Country Gamma (illustrative) has 600 million tonnes of a mineral. It extracts 20 million tonnes a year.

Constant extraction: 600 ÷ 20 = 30 years.

If extraction grows by 4% a year, cumulative extraction after n years is 20 × (1.04ⁿ − 1) ÷ 0.04. Set this equal to 600: 1.04ⁿ = 1 + (0.04 × 600 ÷ 20) = 2.2, so n = ln 2.2 ÷ ln 1.04 = 20.1. Check: after 20 years, 595.6 million tonnes are used. After 21 years, 639.4 million are needed, so the reserve runs out during year 21.

Faster growth in use shortens the life of the reserve from 30 years to about 21. Evaluate: new discoveries, recycling and substitutes can lengthen the life, and a rising price tends to slow extraction.

Impact of growth on the environment and climate change

More output usually means more resources used, more waste and more emissions. The links are:

• Pollution and waste: these are negative externalities of production and consumption.
• Climate change: greenhouse gas emissions from energy, transport and industry build up in the atmosphere. Costs include flooding, drought and crop failure, and they fall across borders and across time.
• Loss of natural capital: forests, soils and biodiversity are depleted. Conventional GDP counts the output but not the loss of the asset.

Growth does not have to raise emissions at the same rate. Emissions intensity is emissions per unit of output. If intensity falls, emissions can fall even while GDP rises.

Worked example 4: growth and emissions together

GDP rises 3% and emissions intensity falls 4%. Emissions change = 1.03 × 0.96 − 1 = −0.0112, a fall of 1.1%. Output grows while emissions fall: absolute decoupling.

If intensity falls only 1%, emissions change = 1.03 × 0.99 − 1 = +0.0197, a rise of 2.0%. Emissions grow more slowly than GDP (relative decoupling), but the stock of gases keeps building.

Policies to mitigate the impact

Policy	How it works	Main limitation
Carbon or pollution tax	Raises the private cost of emitting to match the external cost	Hard to measure the external cost; can be regressive
Tradable permits	A cap sets total emissions and firms trade permits	The cap may be set too loosely; price can swing
Regulation and standards	Bans or limits on emissions and efficiency rules	Not flexible; costs may be uneven
Subsidies for renewables and R&D	Lower the cost of clean energy and technology	Cost to taxpayers; risk of backing the wrong technology
Public investment in clean infrastructure	Rail, grids, recycling systems	Large cost; long lead time
International agreements	Share the effort between countries	Free riding; hard to enforce

Worked example 5: a carbon tax

In a market for a good, demand is Qd = 1,200 − 15P and supply is Qs = −300 + 10P. Each unit made causes 0.5 tonne of emissions.

Before the tax: 1,200 − 15P = −300 + 10P gives 1,500 = 25P, so P = 60 and Q = 300. Emissions = 300 × 0.5 = 150 tonnes.

The external cost of the emissions is 10 per unit, so a tax of 10 per unit is placed on producers. Supply becomes Qs = −300 + 10(P − 10) = −400 + 10P. New equilibrium: 1,200 − 15P = −400 + 10P gives 1,600 = 25P, so P = 64 and Q = 240.

• Consumers pay 64 − 60 = 4 more. Producers receive 64 − 10 = 54, which is 6 less. Producers bear more of the tax because supply is less responsive to price than demand.
• Emissions = 240 × 0.5 = 120 tonnes, a fall of 30 tonnes (20%).
• Tax revenue = 10 × 240 = 2,400.

Picture the diagram: price on the vertical axis, quantity on the horizontal. The tax shifts the supply curve up by 10. The new equilibrium is at a higher price and lower quantity. The vertical gap between the two supply curves at Q = 240 is the tax.

Where sustainability meets inclusion

Environmental policy can hurt low-income households. Suppose the carbon tax raises the price of goods by 10%. A household with income 12,000 that spends 500 on these goods pays 50 more, which is 0.42% of its income. A household with income 60,000 that spends 1,500 pays 150 more, which is 0.25%. The tax is regressive as a share of income. Using revenue to pay rebates to low-income households can offset this. Growth that is both inclusive and sustainable needs policies designed together.

Evaluating the trade-offs

• Growth versus the environment: growth raises incomes and funds clean technology, but unchecked growth can damage the environment.
• Time: costs of action fall now, while benefits go to future generations.
• Scale: a small country gains little by cutting emissions alone, so cooperation matters.
• Elasticity: a tax cuts emissions more when demand and supply are elastic. If demand is inelastic, the tax raises revenue but cuts emissions little.
• Judgement: say which policy mix works best and why, using the country’s income level and its main source of emissions.

Common errors

• Defining inclusive growth as faster growth. It is about who shares the gain.
• Treating equity and equality as the same thing.
• Confusing a fall in the growth rate of emissions with a fall in emissions.
• Saying non-renewable resources are always used unsustainably. Rate, recycling and substitutes matter.
• Drawing a carbon tax as a shift of demand rather than supply.
• Listing policies without evaluating them.

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.