An economy is a system that provides people with goods and services and directly or indirectly satisfies their wants. In this article, you are going to read about the Developed Economy.
On the basis of the level of economic development, economies are classified into the following categories:
- Developed economy
- Underdeveloped economy
What is Developed Economy?
An economy that enjoys a high level of per capita income and a high standard of living is known as a developed economy.
Main features of a developed economy
- Have a high level of per capita income or output.
- People enjoy a higher quality standard of living.
- Contributions of industrial and service sectors are very high.
- Available resources are fully exploited and used.
- Have a high degree of technical development.
- Do not have a severe problem of unemployment.
- Slow growth rate of population.
- A higher level of capital formation and gross domestic savings.
- A high ratio of urban population.
- Maximum people live above the poverty line
Difference between Developed Economy and Underdeveloped Economy
| Developed Economy | Underdeveloped Economy |
|---|---|
| A high per capita income leads to a higher standard of living. | A low per capita income leads to a low standard of living. |
| The incidence of poverty is low. | The incidence of poverty is high. |
| Industrial and service sectors are predominant. | Agricultural or the primary sector is predominant. |
| Resources are properly used and highly advanced capital-intensive techniques are used in production. Therefore, productivity is high. | Resources are underused and traditional techniques are used in production. Therefore, productivity is low. |
| The gap between the rich and the poor is narrow. | The gap between the rich and the poor is wide. |
Economic Growth and Economic Development
Economic growth is an increase in the national income or per capita output over a period. It is a sign of quantitative growth in the country. On the other hand, economic development is a process where the real per capita income of a country increases over a period with a decrease in poverty ratio, unemployment, and income inequality.
Economic Problem
The demand for goods and services arises from human wants. No individual in the whole world can fulfill all his/her wants. Wants are unlimited and means are limited. Thus, this scarcity of means in relation to wants brings forth the economic problem of how many resources should be used in satisfying different wants. In this way, one has to choose a set of wants from among unlimited wants which are to be satisfied with limited resources. Scarcity means a situation where only a limited amount of goods can be produced because of the existence of a limited amount of resources.
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