Evaluate the microeconomic and macroeconomic effects of rapid increases in population in India

Edexcel A-Level Economics Paper 3 June 2025 Insert

Evaluate the microeconomic and macroeconomic effects of rapid increases in population in India. (June 2025)

Plan

• Paragraph 1
  • Argument: one microeconomic effect of an increase in population is an increase in labour supply
  • Diagram: increase in labour supply, fall in costs for firms
  • Evaluation: this can lead to an increase in wage differentials and inequality 
• Paragraph 2
  • Argument: one macroeconomic effect of an increase in population is an increase in economic growth 
  • Diagram: increase in AD 
  • Evaluation: this can cause inflationary pressure but depends on how skilled these workers are, LRAS can also increase 

Paragraph 1 example

One microeconomic effect of an increase in population is a decrease in costs of production. As the working population in India increases, labour supply in most labour markets increase. With more people willing and able to work at each wage, labour supply shifts to the right. The diagram shows that the wage rate decreases from w1 to w2, and the quantity of labour increases from q1 to q2. Firms are then able to benefit from lower costs. The diagram shows a firm’s cost and revenue curves, with average cost and marginal cost shifting downward. This leads to firms being able to reduce prices from p1 to p2, as the profit-maximising condition changes from MC1 = MR to MC2 = MR. As the price went down from P1 to P2, there's an increase in consumer surplus, which is the difference between the price consumers are willing to pay versus the price that they actually end up paying. Also, as the quantity increased from Q1 to Q2, this shows that firms are able to benefit from more economies of scale, since their long-run average cost falls as output increases, as they're able to exploit advantages like being able to bulk buy. The firm is also able to make more profit. As you can see, the size of the rectangle Q2P2C2 is larger than the rectangle P1C1Q1. This means that the firms are able to make more supernormal profits, which means that they can reinvest more and increase dynamic efficiency

A-Level Economics Tutoring

I offer one-to-one and small group A-Level Economics tutoring for students across the UK and internationally. With 87+ five-star Google reviews and tutoring experience since 2017, I specialise in helping students understand difficult concepts and improve their exam technique.