Economic development and population
The following demographic model helps analyse changes of factors of population with respect to a change in development.
Defining some of the terms used above:
To summarise the diagram above:
- Low-income economies are characterised by strong population growth and a high dependency ratio. This will reduce the average living standards in the economy.
- Economies experiencing rising income during development will experience slowing population growth and as a large share of the population will be of working age the economy will have a low dependency ratio leading to rising living standards.
- High-income economies have high average living standards but the sustainability of these living standards is threatened by an ageing population leading to an increase in the dependency ratio.
Population change has a major impact on the allocation of resources and therefore opportunity cost is a significant consideration.
Population change will cause and impact on the allocation of resources in three areas.
- Within private consumption.
- To the government sector.
- Within the government sector.
Homework
- Re-read notes and check understanding.
- Read study guide on population (pp. 25-27).
- Complete population exercise handout.
These notes form a homework given in a lesson on 11/10/2004.
