Economic Development · 4 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 8% of your exam marks.
Population structure, birth/death rates, and the economic consequences of changing population appear in Section B roughly every other paper; typically 6 to 8 marks.
An ageing population has a rising share of older people relative to working-age adults. It is not necessarily a shrinking total population; just one with a different age structure.
Causes of ageing:
A typical 4-mark question rewards four distinct economic consequences.
1. Rising dependency ratio.
Fewer workers supporting more retirees. Each worker has to pay more in tax to fund pensions and social care. The tax burden on the working-age population rises.
2. Higher government spending on pensions and healthcare.
Older people draw state pensions for many years. They also use the health service much more heavily than younger people. Both push government spending up, often forcing tax rises or borrowing.
3. Shrinking labour force.
A smaller working-age population means fewer workers to produce goods and services. Potential output and long-run growth fall unless the gap is filled by immigration, retirement-age rises, or productivity gains.
4. Shifts in the pattern of demand.
The mix of goods and services consumers buy changes. Demand rises for healthcare, retirement services, care homes, adapted housing and age-focused leisure (cruises, gardening, healthcare-related products). Demand for goods aimed at younger people (school books, baby products, certain entertainment) falls. Firms in growing sectors benefit; firms in shrinking sectors struggle.
5. Pressure on pension systems.
Most state pensions are pay-as-you-go: current workers' taxes pay current retirees' pensions. With fewer workers per retiree, the system becomes financially unsustainable unless contributions rise, benefits fall, or retirement ages rise.
An ageing population is not all bad: firms in healthcare and age-related goods see rising demand, and many older workers are more productive than younger ones. The challenge is to manage the transition without bankrupting the state.