Economic Development
Living Standards
Standard of Living refers to the social and economic well-being of
the individuals in a country.
Real Gross Domestic Product (GDP) Per Capita
GDP is the main measure of the total value of all goods and services
produced in a given period of time
An increase in prices will increase nominal GDP, but this is
measured in current dollars, thus includes inflations
=NominalCPI×100Real GDP=CPINominal×100
=Real GDPNumber of PopulationReal GDP Per Capita=Numbe
r of PopulationReal GDP
If the economy has an extremely rich person & everyone else is
poor, it brings up the Real GDP per capita
Human Development Index (HDI)
Used by the United Nations to make comparisons of human &
economic development in different countries
Combines three different measures for each country
o Standard of living, measured by average incomes
o Being educated, measured by adult literacy rate
o Living a long, healthy life, measured by life expectancy
Single index with a value between 0 and 1
Greater than 0.8 = high human development. Less than 0.5 = low
human development
Reasons For Low/Varying Economic Development
Over-dependence on agriculture
Domination on international trade by developed nations
Lack of capital
Insufficient investment in education, skills & Healthcare
Low levels of investment in infrastructure
Lack of efficient production and distribution systems
High population growth
Other factors like a corrupt govt. or war
Poverty
Absolute poverty Relative poverty
Number of people living below a
Measures the extent to which a
certain income threshold or
household’s financial resources
number of households unable to
fall below an average income
afford certain basic goods &
level.
services
Occurs when people are poor
Occurs when people do not have relative to other people in the
access to basic food, clothing country, unable to participate fully
and shelter in normal activities of the society
they live in
Causes of Poverty
Unemployment
Low wages
Illness
Age
Poor Healthcare
Low literacy rates
High population growth
Poor infrastructure
Low FDI (Foreign Direct Investment)
High public debt
Reliance on primary sector output
Corruption and Instability
Alleviating Poverty
Governments will use policies to help alleviate poverty in their
country, or in another country:
What are the
Policy Why is it needed?
problems?
Free food supplies can
Poor farming methods
Food aid force farmers out of
produce insufficient food
business
LEDCs lack the capital to
invest in an industrial
Financial Loans have to be repaid
base and modern
aid sometimes with interest
machinery and
infrastructure.
Most people lack the skill
LEDCs lack access to
to use modern
modern machinery and
technology; instead of
Tech aid equipment and
using machinery, more
knowledge of modern
jobs are needed to
production methods.
employ people.
This may encourage
Relieving LEDCs of debt
LEDCs to borrow more
will allow them to use
Debt relief money, or corrupt
money for economic
governments may misuse
development instead.
money.
Removing
LEDCs may have natural
overseas MEDCs will force down
supplies can be exported
trade their price
for money
barriers
Governments in LEDCs Advice is not enough;
Economic
lack economic LEDCs need more capital
Advice
knowledge & stability
Population
Factors that affect population growth
Birth rate
Death rate
Net migration
Immigration & emigration
Dependency Ratio
Comparison of people in employment with the number of people
who are not in the labour force.
Reasons for different population growth rates
Varying Birth Rates
LEDCs have:
o Large families to help produce food & work for money
o High infant mortality rate
o Low supply of contraceptives/forbidden to use them
In MEDCs, people marry later in life, so birth rates fall
Varying Death Rates
MEDCs have:
o Better food, housing, hygiene &high life expectancy
o Fatty foods, smoking, and lack of exercise have increased
rates of diabetes, cancer & heart disease
o Improved medicine & healthcare; prevents many diseases &
increased life expectancy
LEDCS have:
o Widespread diseases which lower life expectancy
o Natural disasters, famines, wars
Population Structure
The Demographic Transition Model:
This shows that population growth occurs in stages
Population Pyramid: a type of graph that shows the age and sex
structure of the country
Stage 1: high birth rate; high death rates; short life expectancy; less
dependency (since there are few old people and children must work
anyway)
Stage 2: high birth rate; fall in death rate; slightly longer life
expectancy; more dependency due to more elderly
Stage 3: declining birth rate, declining g death rate, longer life
expectancy, more dependency
Stage 4: low birth rate, low death rate, highest dependency ratio,
longest life expectancy