What are the charateristics of a less developed economy? IGCSE

What are developing countries?

The development of a country is measured with statistical indexes such as income per capita (per person) (GDP), life expectancy, the rate of literacy. Countries are categorised as less developed because of their poverty and low average incomes, their lack of good human resources and their low level of economic diversification.

HOT QUESTION: Explain what is likely to be the occupational distribution of the population in a less developed country?

SUGGESTED ANSWER: Most of the workforce is engaged in agriculture and other primary industries, with some in manufacturing and some in service industries. Many of these jobs will be poorly paid.

Developing countries are in general countries which have not achieved a significant degree of industrialization relative to their populations, and which have, in most cases a medium to low standard of living. There is a strong correlation between low income and high population growth.
Other terms sometimes used are less developed countries (LDCs), least economically developed countries (LEDCs)

Characteristics of a less developed economy

These economies are marked by a

• high birth rate,
• relatively high death rate and
• a low life expectancy
• high population growth
• High dependency ratio
• Low GDP per capita.
• Lower proportion of population is enrolled in education
• Low level of living standard
• Poor health due to poor nutrition, lack of access to facilities such as clean water and proper sanitation.
• Health care provisions are of often poor.

Structure of the Economy

These economies are more reliant on primary sector.
They export certain primary commodities, agricultural goods and low technology products.

Difference between Developed and Developing economy

Difference between developed economy and less developed economy

	Developed economy	Less developed economy
Population	low birth rate higher life expectancy low death rate due to better medical facilities aging population	Developing countries have higher rate of natural increase. Death rates have fallen faster than birth rates; birth rates are significantly higher than in developed countries, whereas death rates are only somewhat higher than in developed countries. Tradition, lack of contraception, poverty and lack of education are the main causes of high population growth rate.
Education	High level of literary, Highly trained workforce. Workers are paid high rates of wages.	Low level of literacy with low skill levels of the workforce results in low wages of the workforce. Government is the main provider of education services and have low percentage of public expenditure allocated for education.
Economic structure	These economies usually have a larger tertiary sector and most of the workforce is engaged in service industries. The country produces and exports high technology products or high value added goods.	Primary sector is the major contributor to the GDP of the country. Low GDP per capita is there. Usually exports agricultural goods or natural resources and imports value added goods from developed countries.

How do some firms become large? GCEO

Some firms become large by various ways. One of the important methods is by merger or integration of two or more firms. This can be in the form of horizontal merger where two similar firms join together or lateral merger where two different firms merge. This can also be possible in different stages of production. Secondly Advertising is also one possible way to grow since it generates higher demand and sales which result a need of higher capacity. Moreover issuing shares also increases the company’s capital and size.

Why might a government wish to create jobs?

Government wishes to create jobs due to various reasons. Firstly, Job creation increases the production, income and the employment of the country. This gives a greater benefit for the people of the country and the country as well. Secondly this increase in production and income results an increase in economic growth which gives a lot of benefits such as improvement in living standard. Moreover, this helps to achieve government aims of full employment, economic growth and positive results to the balance of payment. And also increase demand for goods and services. wBwy: Awlim.studyguide.

Policies to encourage private business

Explain the policies that a government might use to encourage private businesses. [6]
Government might use various policies to encourage the private businesses. One of the most important policy is that granting subsidies which encourage the business by reduction in their cost of production and increase in the output. Secondly, government can bring changes in the taxation. Reduction in the tax rate also is an incentive to business to increase their production. Moreover, some government gives grants such as new machines free labours to some businesses which are again an incentive for the businesses.

Importance of investment in an economy

Explain why investment is important in an economy. [6]
Investment means an increase in the real stock of capital goods. Investment is important for an economy because it generates lots of positive effects for the economy. Firstly , an investment create lot of job opportunities where people of the country gets a chance to work and at the same time this opportunities increase their income as well as the national income. Secondly, increase in investment brings an increased international competitiveness where people enjoy wide variety of superior quality goods and services at cheaper price. Finally, it increases the economic growth of the country by increasing the total production of the country.

What is Economic growth?

What is meant by economic growth? [3]
Economic growth can be defined as an increase in the total output of the country. This may be in the form of increase in Gross domestic product of the country. Economic growth brings various benefits such as employment opportunities, increase in income, and improvement in the living standard. etc…