Economic development

5.1  Living standards

Standard of living: social & economic wellbeing of individuals in a country at a particular pt in time

Measures of living standard

  1. GDP per capita
  2. Human Development Index (HDI) – healthcare, education & income level

Explain how HDI is measured. (6)

  • standard of living – GDP per capita
  • longevity – life expectancy at birth
  • Education – adult literacy
Adv Dis
  • Considers several key indicators of living standards
  • ↑ healthcare & education are more likely than income level → indicate social wellbeing
  • Ignores qualitative factors e.g. gender inequalities
  • Ignores inequitable distribution of income so ↓ accuracy when indicate for average person’s living standards
  • Ignores environmental & resources depletion
  • Ignores cultural differences

Living standards vs income distribution

  1. Productivity levels
  2. Role of gov – eg tax → redistribute income
  3. Pop size
  4. Distribution of nation income eg gov ↑ spending on military ≠ ↑ living standards
  5. Regional difference
  6. General price level – ↑ inflation, ↑ cost of living, ↓ living standards
  7. Level of education
  8. Level of freedom

5.2  Poverty

Poverty: condition when ppl lack adequate income & wealth to sustain basic standard of living, living on less than eg $1.25 a day

Absolute poverty: where ppl do not have access to basic items eg food

Relative poverty: where ppl are relatively poorer than other ppl in the economy eg have access to fewer goods and services than others, relative poverty always exists

Analyse how long-term unemployment cause relative poverty

  • Define relative poverty
  • They have very low or no income so they don’t have purchasing power to buy goods & services that an average individual can eg healthcare
  • They get depressed, reduces incentive to find work
  • Not able to provide children with good education so they cannot find a high-paid job

Causes of poverty

  • Unemployment
  • Low wages
  • Poor healthcare
  • Age
  • Low literacy rates
  • High pop growth
  • Poor infrastructure eg transportation
  • Low FDI
  • High public debt
  • Reliance on primary sector output
  • Corruption & instability eg civil war / dishonest gov officials

Policies to ↓ poverty & redistribute income

Discuss which policies are likely to be most successful in reducing the extent of poverty in a country. (8)

  • Promote economic growth
  • Improve education
  • Provide more generous state benefits eg state pension
  • Use progressive taxation
  • Introduce / increase national min. wage

5.3  Population

Population: total no. of inhabitants of a particular country

Population growth: rate of change in size of country’s population

Birth rate: no of live births per 1000 of pop per year

Fertility rate: average no of births per woman

Replacement fertility rate: no of children that average woman must have to maintain stable pop size

Explain why the birth rate is decreasing (4)

  • Women marrying later,
  • ↑education,
  • ↑job opportunities
  • Introduction of family planning

Death rate: no of deaths per 1000 of pop per year

Immigration: ppl enter country to live/work

Emigration: ppl leave country to live/work

Net migration rate = immigration – emigration

Reasons for different rates of pop growth in different countries

  • Birth rate
  • Death rate
  • Net migration rate
  • MEDCs vs LEDCs

Effects of changes in size & structure of pop on different countries

Optimum population: output of goods/services per capita of pop is maximised

Under population – insufficient labour

Over population – lead to shortage

Population distribution: composition & structure of country’s population

Dependent population: 0-14 (school) & 65+ (retirement)

Working population: 15-65 (active labour force)

Population distribution impact

  1. Consumers – different demand based on age & gender
  2.   Eg Elderly ppl spend more on healthcare
  3. Firms – ↑ pop growth, ↑ labour supply
  4. Gov – ↑ workforce, ↑ tax revenue
  5. Economy – ↑ pop growth, ↑ demand of goods/services, ↑ scare resources, ↑ pressure
  6. Natural environment – eg pollution

5.4  Differences in economic development between countries

Economic development: intangible concept that considers quantitative & qualitative variables in raising standard of living within a country

Factors accounting for differences in economic development

  1. GDP
  2. Productivity
  3. Population growth
  4. Primary, secondary, tertiary sector
  5. Saving & investment
  6. Education
  7. Healthcare

Characteristics of developing economies (6)

  1. low level of savings, education & healthcare
  2. high rate of population growth
  3. high proportion of workers in the primary sector

Exam questions