Chapter 35 Differences in economic development between countries

Question 1

Define economic development

Answer 1

An improvement in economic welfare

Question 2

Causes of differences in economic development between countries (7)

Answer 2

Differences in income per head - Lower GDP per capita —> lower economic development (people cannot afford a good standard of living)

Differences in saving due to differences in income per head - poor people can’t save. If no save, lack of investment

Differences in investment - low value of capital goods per worker —-> reduce productivity —-> worker receive less pay

Differences in population growth - High dependency ratio —> more resources used to support the dependent population, opportunity cost of having been able to improve quality quality of life

Differences in education and healthcare - Lack of education + healthcare —> reduce quality of life —-> low productivity

Differences in the size of the primary, secondary and tertiary sectors - Economic development lowest in large proportion of workers in primary sector. This is because of undermployment, where the worker’s skills are not being properly utilized, lowering producivity

Differences in productivity - lower output per worker —> lower income per head

Question 3

Vicious cycle of poverty (4)

Answer 3

Low income —-> low saving —-> low investment —-> low productivity

Question 4

Problems facing economies with relatively low economic development

Answer 4

High population growth - Resources directed to dependent population, involves O.C

High levels of international debt - many poor countries borrow money in the past, large proportion of country income spent on repyaing loans, involves opportunity cost

Lack of investment in human capital and capital goods - holds back productivity and new tech —-> reduce internal competitiveness

emigration of workers - doctors, nurses, teachers etc

trade restrictions on their products - foreign governments subsidise their own products, and impose tariffs on agricultural products which many poor countries produce

unbalanced economies - certain markets underdeveloped, causing lack of saving and investment