Explain any five important characteristics of an underdeveloped economy.

Asked by Topperlearning User | 15th Apr, 2015, 03:17: PM

Expert Answer:

The important characteristics of an underdeveloped economy are:

  1. Low per capita income: is one of the major characteristics of an underdeveloped economy. The per capita income in underdeveloped economy is low and therefore majority of the population live below the poverty line. Consequently, people this economy live in miserable conditions.
  2. Increase in the growth rate of the population: In most of the underdeveloped economies, the population growth rate is very high as compared to other economies. Also, due to improved medical facilities, the mortality rate among all the sections of the society is reduced. As a result, as the population increases, the consumption of the limited resources also increases, resulting in less saving of resources and a slower growth rate.
  3. Underutilisation of resources: In the case of many underdeveloped economies, enriched with large and sufficient resources, most of these resources remain underutilised due to lack of skilled personnel and technicalities.
  4. Unemployment: Underdeveloped economies suffer from widespread unemployment. Due to various reasons such as rapid population growth, lack of investment, etc. unemployment prevails in such an economy. It is estimated that underemployment and unemployment together constitutes nearly 30% of the workforce of an underdeveloped economy.
  5. Unequal distribution of income: Inequality in the distribution of income is prevalent in these economies. As large part of the national income goes to smaller sections of society, the larger sections of society have to be satisfied with whatever part of income is available to them. According to the Human Development Index, the top 20% of India’s population receives 45.3% of the national income while the poorest 20% of the population receive 8.1% of the national income.

Answered by  | 15th Apr, 2015, 05:17: PM

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