Population
Population
• Population refers to the total number of inhabitants of a particular country. Economists are interested in population size
because people are essential for the economic prosperity of a country and also responsible for the depletion of the Earth’s
scarce resources.
• Population growth refers to the rate of change in the size of a country’s population.
• Change in population size can have huge and long-lasting effects on the world’s economy and the natural environment.
Factors affecting population growth rate
• The birth rate measures the number of live births per thousand of the population in a year. It is measured by dividing the total number of
births in a country by the population size, expressed per thousand of the population. The higher a country’s birth rate, the greater its
population growth will tend to be.
• The death rate measures the number of deaths per thousand of the population in a year. It is measured by dividing the total
number of deaths in a country by the population size, expressed per thousand of the population. The lower a country’s death rate, the
greater its population growth will tend to be. The death rate is dependent on factors that affect the quality of life, such as income levels,
health technologies, nutrition and housing.
• The fertility rate measures the average number of children born per woman, thus indicating the potential for population change in a
country.
Economists consider a fertility rate of two children per woman to be the minimum replacement fertility rate for a stable population (the
number of children that the average women must have to replace the existing population).
Fertility rates above two children indicate a growing population.
Fertility rates tend to fall as an economy develops, due to the higher opportunity costs of raising children.
Factors affecting population growth rate
• Net migration rate: The size of a population can also change due to the
physical movement of people in and out of a country. Immigration
occurs when people enter a country to live and to work. Emigration
occurs when people leave a country to work and live abroad.
The net migration rate measures the difference between the number of
people entering and leaving a country per thousand of the population in a
year. It is calculated using the formula:
Net migration rate = immigration − emigration
If more people enter a country than leave in the year, there is said to be net
immigration.
By contrast, if more people leave a country than enter the country, there is
said to be net emigration
Factors affecting population growth rate
Life expectancy – This measures the number of years an average person in the country is expected to live. The longer
the life expectancy, the greater the population size tends to be.
Social changes – In economically developed countries, women are choosing to have children at a later age, partly due to
the high cost of raising children but also because more women opt to have a professional career. In China, the one child
policy has significantly reduced the population growth of the world’s most populous country
Natural disasters, diseases and war – These unpredictable events can cause a significant change in population size
Why different countries have different population
growth rates.
• Living standards: in many less developed countries people want large families to help them produce food and work for money. They
have many children because some will die young due to poor health facilities. Improvement in living standards and better healthcare will
result in fall in birth rate and death rate.
• Contraception: increased use of contraception and legalisation of abortion have reduced birth rates in developed countries.
• Customs and religion: Lack of information many religious beliefs don’t allow the use of contraceptive pills, so birth rates in those
communities rise. In developed economies it is now less fashionable to have large families, so birth rates have fallen.
• Female employment: Many women in developed countries go to work to earn an income, and some may not want to take time off to
raise children.
• Marriage: In developed world people are delaying marriages and so birth rates have fallen.
• Technological improvements: Improvements to technology and transport, leading to a wealthier population which increases life
expectancy and reduces death rate in developed economies.
• Improvements to medicine and medical care also help reduce death rates in developed economies.
Dependent Popualtion
• The working population in an economy supports the dependent population. People in work not only produce
goods and services for themselves but also for people who do not or cannot work.
• The dependent population includes people who are too young, too old or too ill to work, school and college
students in education, and the unemployed. For economists, the dependent population will typically include all
those aged between 0 and 14 (those below the school leaving age) and those aged 65 and above (those above the
retirement age). However, it also includes full-time students and the unemployed
• The dependency ratio measures the number of economically dependent people relative to the economically active
population in an economy. The dependency ratio is a comparison of the number of people who are not in the
labour force with the number of people in active paid employment.
Reasons for a rise in dependency ratio
The higher the dependency ratio, the greater the tax burden on the working population to support
those who are not economically active (not in active paid employment). The dependency ratio can rise
due to several reasons, such as:
• high birth rates, mainly in less economically developed countries
• a higher compulsory school leaving age, thus keeping school students as part of the dependent
population for longer
• social changes such as workers entering the labour force at a later stage due to the demand for
higher education, or more people choosing early retirement (thus reducing the size of the working
population).
Optimum Population
• The optimum population exists when the output
of goods and services per head of the population
is maximised.
• Under population: country is under-populated if
it does not have sufficient labour to make the best
use of its resources.
• Overpopulation occurs when there are more
people in a country/region than can be supported
by its resources and technology
Consequences of under population vs over population
Over population can lead to: • Under population can lead to:
• Fertility rates above the replacement level can lead to potential
over-population, with negative economic consequences such as • Fertility rates below the replacement level can lead to
famine, housing shortages, energy shortages and diseases. under-population, causing potential economic decline.
• This causes a fall in GDP per capita as there are insufficient
• Fewer people paying tax which can lead to higher taxes
resources to sustain the population.
• Higher levels of pollution • Underused resources, which can lead to wastage
• Higher crime rates
• A shortage of workers
• Higher unemployment or underemployment
• Lower levels of exports and production which affects the
• Higher levels of food and water shortages wealth of an area
• Higher pressure on services such as hospitals and schools
• Fewer customers for goods and services
Government’s role in controlling population size
In the case of under population, GDP per In the case of over population to reach the optimum
head of the population could be further population, the government could either introduce
increased if there were more human measures to reduce the population size or introduce
resources. measures to boost investment and productivity in the
economy.
In this case, to reach the optimum
population, the government could
introduce measures to increase the
population size, such as encouraging
immigration.
Population Distribution
Apart from the population size and population growth rates, economists also look at demographics – the
study of population distribution and trends also known as population structure
Such demographics include differences in the composition of gender, age distribution and the dependency
ratio.
The population structure is the result of changes in:
• the birth rate
• the death rate
• net migration
Population structure & population pyramids
The structure of the population can be analyzed using:
Gender: This refers to the number of males compared with the number of females in the population.
Age distribution: the number of people in each age-group. Falling birth and death rates mean that the average age in developed
countries are rising whereas in developing and less-developed economies, high death and birth rates result in low average ages.
Geographic distribution: where people live. 90% of the world population live in developing countries. This puts a lot of pressure on
scarce resources in these countries. About half of the world population live in urban areas, and this continues to rise, which has helped
increase production and living standards but resulted in rapid consumption of natural resources and high levels of pollution and
congestion.
Occupational distribution: what jobs people work in. In developed economies, more people work in the service sector while in less-
developed economies, most people work in agriculture. In developing economies, there is a huge migration of workers from primary
production to manufacturing and service sectors. Female employment and self-employment are also rising, which will add to
production and higher living standards.
Population Pyramids
Population pyramids display the age and gender distribution of an economy. The vertical axes show
the age groups and the horizontal axes show the gender groups- males on the left and females on
the right.
Population pyramids are used to display the gender and age structure of a given population
• They illustrate the distribution of population across age groups and between male/female
Population pyramids can be used to identify the following groups:
• Young dependents
• Old dependents e.g number of retired people
• Economically active (working population or labour force)
• Dependency ratio
Population pyramid of low – income developing country
• Low-income countries tend to have a relatively
larger proportion of their population in the
younger age groups. For example, around 39 per
cent of the population in Ghana are aged 14 and
below, with only about 4 per cent of the population
aged 65 and over.
• Developing economies have:
High birth rate
Low life expectancy
High death rate
High infant mortality rate (significant decrease between
0-5)
Young dependent population dominates the
distribution
Population Pyramid- developed
By contrast, wealthier countries tend to have an
ageing population with a growing number of elderly
people.
For example, only 13.5 per cent of people in Japan are
aged 14 and below, while 38.8 per cent are aged 55
and above.
•This population pyramid indicates
• Decreasing birth rate - indicated by decreasing
population levels from age 29
• Increasing life expectancy - indicated by the
relatively straight sides reaching the age of 74,
followed by a good proportion of people living much
longer
• Low infant mortality
• Ageing population - older dependent population
with large proportion of the population older than 40
Effects of population changes
Population changes can have major impacts within the economy resulting in changes to consumption,
production, lifestyle, standards of living and government policies (fiscal, monetary and supply-side)
Typical changes that occur are
• Progressively ageing populations as economies develop
• Falling birth rates as economies develop
• Swings in net migration as influenced by war, famine, natural disasters and government policy
Consequences of Ageing population
• The workforce will decline
• there will be much dependence on the tax-paying population to fund the welfare of old people.
• Increase in demand for products for old people including healthcare.
• The government will have to spend more on housing, old age welfare schemes etc.
• Old people are less mobile and so the economy will be slow to adapt to new technologies.
• Firms suffer worker shortages
• Labour shortages result in increased wage costs for firms
Consequences of falling birth rates
• Falling birth rates have the following impact on an economy
• School closures due to fewer children
• Future labour shortages
• Governments typically put in place incentives that encourage families to have more children
• Governments may change the migration laws to encourage immigration so that labour shortages are
prevented
• Excessive immigration can change the nature and culture of different regions within a country
Effects of increasing population size
• Increases size of the home market and thus potential for increase in aggregate demand in the long-run.
• Higher demand and incomes will lead to more economic growth and expansion.
• Increased supply of labour.
• Puts more pressure on already scarce resources, especially land.
• More capital goods will have to be produced to sustain and satisfy the needs and wants of the enlarged population.
• Fall in rate of productivity in line with the law of diminishing returns – too many people working on limited resources means low productivity.
• Shift of employment and output from the primary sector towards the services sector because land for primary activities is fixed, but want for
services is practically infinite as population grows, and the emergence of mechanisation and technologies will force people out of the primary sector.
• Congestion of urban centres: as population and incomes rise, people will move to cities and towns which will become crowded. There will be need
for heavy transport, communications, housing, waste management infrastructure spending.
Effects of migration
In some countries migration can lead to an imbalance in the population structure e.g.
the UAE has significantly more males than females
Rapid population growth caused by migration can lead to
• Increased pressure on services such as healthcare and schools resulting in increased costs for
government
• A shortage of housing which generates social issues in society
• Increased traffic congestion which is a negative externality
• Increased water and air pollution which are negative externalities
• Food shortages
Consequences of population changes on:
Consumers – The demand for goods and services changes with variations in population trends. Customers have different
demands based on their age, gender,religion, ethnic group and family size. For example, elderly people in a country with an
ageing population might spend proportionately more of their money on health care and related products. By contrast, parents
of young children might spend more of their income on housing, education, clothing, family vacations and toys. Firms will seek
to exploit these changes in demand for different goods and services.
Firms – The demand for, and supply of, labour will change following long-term changes in population trends. For example,
rapid population growth should increase the future supply of labour. By contrast, the combination of low birth rates and net
emigration will reduce the future supply of workers in the country.
ageing population of these nations, especially in the case of high-income countries, will have profound impacts on the future
supply of labour.
Government – A growing population can bring about benefits if it means the government is able to collect more tax revenues
from a larger workforce. However, it can also mean added pressure for the government to provide more public services,
welfare benefits and state pensions. As a result, many governments have introduced compulsory pension savings schemes and
have raised official retirement ages. For example, France increased the retirement age from 60 to 62 years in 2011, with plans
to increase this gradually to 68 years of age
The economy – Continual population growth puts more pressure on an economy’s scarce resources. This
can lead to inflationary pressures or an increase in the demand for imports if the country cannot produce
enough to meet the needs and wants of the population. For example, land in prime locations is scarce, so a
larger population in these areas is likely to force land prices to soar. Inflation can create problems for the
economy and cause economic growth to slow.
The natural environment – An increase in the size of a population also puts strain on the environment.
Non-renewable resources are depleted in the production process and the increased level of production also
puts strain on the natural environment. For example, pollution and traffic congestion are by-products of
overpopulated regions of the world