Examine two likely benefits for the Rwandan economy of the growth in the country’s population

Edexcel A-Level Economics Paper 2 June 2021 Extract

With reference to the information provided, examine two likely benefits for the Rwandan economy of the growth in the country’s population. (8 marks)

An increase in population can contribute towards economic growth. Rwanda's population grew from around 9.5m to around 12.3m from 2008 to 2018. As the population grows, there is a greater need for people to satisfy their needs and wants, and maintain a decent standard of living. This means that consumer spending is likely to increase, which is a component of aggregate demand. As aggregate demand increases, real gdp increases as there is a greater value of goods and services need to be produced.

Secondly, population growth can lead to an increase in productivity. A greater population should lead to an increase in the working population, meaning more people willing and able to work. As a result of high labour supply, firms have more workers to choose from, so workers have less bargaining power. This might lead to lower wages and therefore lower costs of production for firms.

However, this depends on the demographics of the population. It could be that the population growth is due to an increase in the birth rate, meaning a higher number of children. This would only lead to more workers and more economic growth after a huge time lag, but in the mean time it would cause more burden on families and also the government in terms of paying for services like education and healthcare. The extract mentions that absolute poverty was stagnant between 2014 and 2017, which would be a bigger worry with more children in the population.

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