IGCSE ECONOMICS
ECONOMIC DEVELOPMENT
Content
Review
Homework challenges
Differences in Economic Development
between Countries
Indicators of living standards
Absolute and relative poverty
Plenary
Differences in Economic Development
Economic development involves an increase in
the economic welfare or well-being of people
through growth in the productive scale and
wealth of an economy.
National economies expand from developing into
more developed economies.
Differences in Economic Development
Differences in Economic Development
A developed economy is thought of as
having large modern efficient farms, a
wide range of industries with firms of
different sizes producing and selling a
wide variety of goods and services, a
well-developed road and rail network,
wealthy and educated population.
Differences in Economic Development
A developing economy has a relatively
low level of economic development.
Farming methods are poor. There are few
industries and very few firms producing
and selling good-quality goods and
services. Many live in poor housing
conditions,. Receive little or no
education, low life expectancy, may lack
access to clean water.
Newly industrialized economies are
undergoing significant growth in their
Differences in Economic Development
Differences in industrial structure
The chart below shows the distribution of employment
in Liberia
Differences in Economic Development
Differences in education and healthcare
(provision, quality, access)
The quality, level of provision and accessibility of
education and healthcare in most developed
economies is generally good.
Differences in factor productivity
Factor productivity is high in many developed
economies and it’s low in many developing economies
because workers are poorly trained or educated. Their
production methods tend to be old and outdated.
Differences in savings and investment
In the least developed countries average income is
low; there are insufficient funds from savings to
provide the capital they need to invest in the
Differences in Economic Development
Differences in population growth
Many less-developed countries have rapidly
expanding populations; they have large
juvenile populations that are increasing
pressure on their country’s scarce
resources; in developed countries, on the
other hand, the labor supply is decreasing.
Differences in income
in 2017 the average income per person in
US - $60000; in India - $1900; Malawi -
$325
Differences in Economic Development
Other factors
Unstable and corrupt governments,
conflicts with neighboring countries have
often blighted the development of some of
the least-developed countries.
Development Indicators
The main measure of the level of economic
development in a country is the total value of its
output, or Gross Domestic Product (GDP).
The pace of economic development is measured
by the annual rate of change in its total output,
or real GDP.
Dividing the total GDP of a country by its total
population will provide a better indicator of the
level of economic development; this measure is
called GDP per capita.
Price inflation erodes the real value or purchasing
power of people’s incomes over time. We take
into account the price inflation and compute the
Development Indicators
Development Indicators
Human Development Index provides a wider
measure of living standards and economic
welfare than GDP per capita. Its value is between
0 and 1 and combines 3 measures:
Living standards measured by the average gross
national income per capita
Level of education measured by how many years a
person aged 25 will have spent in education
Healthcare and the achievement of healthy lifestyles
measured by life expectancy
Development Indicators
Measuring Poverty
Absolute poverty is the inability to afford basic
necessities to live successfully, such as food,
water, education, healthcare, shelter.
In 2017, the World Bank defined extreme poverty
as the condition in which a person is trying to
survive on less than $1.9 per day.
Relative poverty is a condition of having fewer
resources than others in the same society. It’s
measured by the extent to which a
person’s/household’s financial resources fall
below the average income level in the economy.
Measuring Poverty
The global multidimensional poverty index
combines a range of indicators to monitor
economic hardship in over 100 developing
countries. It looks at living standards, education
and health but uses a large number of indicators
of household deprivation.
Measuring Poverty
What Causes Poverty
Identify causes of poverty
What Causes Poverty
Lack of resources
Lack of education
Low wages
Old age, disability and ill health
Vulnerability to climate change and natural
disasters
Wars and internal conflicts
Corruption
Measures to Alleviate Poverty
Promote economic growth
Improve the quantity and quality of education
Measures to reduce unemployment
Progressive taxes
Reducing indirect taxes
Money raised from taxes can provide income
support to low-income earners
Tax revenue can be used to subsidize the building
of free or low-cost home for poor families to live
in
Introduce minimum wage laws
International Measures to Reduce Poverty
Food aid
Technological aid
Financial aid and low-cost loans
Debt relief
International Measures to Reduce Poverty
Some economists argue that overseas aid has
not worked and that much of it has been wasted
or diverted away from those people who need it
the most.
Reasons:
Aid often has conditions attached (require those
countries receiving it to employ their firms and
experts to design and build their infrastructure
projects etc.)
Many less-developed countries are poorly managed or
don’t have skills they need to invest financial aid
wisely
Corruption in place
International Measures to Reduce Poverty
