Economic development
Living standards are compared using real GDP per head and the Human Development Index. Development is linked to poverty, population changes and differences between countries.
📌 Key points
- Real GDP per head = real GDP ÷ population; it is a common measure of living standards.
- GDP per head does not show how income is distributed, the informal economy, working hours, pollution or quality of life.
- The Human Development Index (HDI) combines life expectancy, education (mean and expected years of schooling) and GNI per head; it runs from 0 to 1.
- Absolute poverty is not having enough income to meet basic needs (food, clean water, shelter); relative poverty is having income well below the average in that country.
- Causes of poverty include unemployment, low wages, illness, old age and lack of education; policies include promoting growth, education, a minimum wage and progressive taxes with benefits.
- Population change = births − deaths + net migration. Birth and death rates are measured per 1,000 people per year.
- Birth rates fall with better education and jobs for women, contraception and lower infant mortality; death rates fall with better healthcare, diet, clean water and sanitation.
- The optimum population gives the highest output per head. An ageing population raises spending on pensions and healthcare.
- The dependency ratio compares the dependent population (young and old) with the working population.
- Developing economies tend to have lower productivity, faster population growth, a larger primary sector, and lower saving, investment, education and healthcare.
📖 Key terms
- GDP per head
- GDP divided by the population of a country.
- Human Development Index
- A measure of development combining life expectancy, education and income per head.
- Absolute poverty
- When people do not have enough income to meet their basic needs.
- Relative poverty
- When people’s income is well below the average in their country.
- Net migration
- Immigration minus emigration.
- Birth rate
- The number of live births per 1,000 of the population in a year.
- Dependency ratio
- The proportion of the population that is dependent compared with the working population.
- Optimum population
- The population size that gives the highest output per head.
✏️ Worked example
A country has a population of 10 million, a birth rate of 25 per 1,000, a death rate of 9 per 1,000 and net migration of −2 per 1,000. Calculate the change in population in one year.
- Births = 25 × 10,000 = 250,000 (there are 10,000 thousands in 10 million).
- Deaths = 9 × 10,000 = 90,000.
- Net migration = −2 × 10,000 = −20,000.
- Change = 250,000 − 90,000 − 20,000 = 140,000.
- Answer: the population rises by 140,000 (1.4%).
When comparing living standards, use real GDP per head, not total GDP, and explain at least one limitation (e.g. it ignores how income is shared).
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