Demand · IGCSE Economics

Uruguay fact file 2023 population 3.5m gross domestic product (GDP) $77.0bn government revenue $10.7bn government budget deficit $2.5bn In 2023, the Uruguayan Government raised the retirement age from 60 to 65. There are concerns about the current high government spending on pensions and it is expected that life expectancy in the country will continue to rise. A higher retirement age will have an impact on the country’s labour force, with most workers employed in the tertiary sector. The average age of Uruguay’s population is increasing due to a fall in the birth rate and emigration of young workers. Many Uruguayan workers emigrate to the United States (US) where wages are higher. However, income inequality is considerably lower in Uruguay than in the US. The tax system in Uruguay is more progressive than in the US, and the Uruguayan Government spends a higher percentage of GDP on education and healthcare. In both Uruguay and the US, there is increasing demand for swimming pools. These use a large amount of water. Demand for some luxury items, such as swimming pools, is increasing in Uruguay. Demand for healthcare is also rising which is likely to increase the number of doctors in Uruguay. Table 1.1 shows the number of doctors per thousand people and life expectancy in selected countries. Table 1.1 Number of doctors per thousand people and life expectancy in selected countries in 2023 doctors life expectancy country (per 1000 people) (years) Angola 0.2 62 Bangladesh 0.8 74 Chad 0.1 53 Indonesia 0.7 68 New Zealand 3.5 83 Uruguay 6.2 79 In 2023, Uruguay experienced its lowest inflation rate for eighteen years. This low level of inflation encouraged investment in the country. It changed the international competitiveness of the country’s products against its main trading partners, which had higher inflation rates. It also had an impact on the cost of debt in the country and firms’ willingness to increase their output. Prices change at different rates in different markets. In several markets in Uruguay, there is only one firm. All of Uruguay’s monopolies can set the price of the products they sell. Having monopoly power can also affect the firm’s average total cost and the quality of what they produce.

The UK Government imposes an indirect tax on a range of products. However, some goods and services do not have an indirect tax on them. These include books, children’s clothes and cakes. UK clothes firms would like the indirect tax removed from adults’ clothes. In 2023, there were some mergers between UK clothes firms. A year later, the UK Government planned to put an indirect tax on private sector school fees.

It takes many years for an olive tree to produce olives, making their supply inelastic. However, many economies have developed due to increases in the sales of this primary-sector product. Greek olive farmers have the potential to contribute to economic development. These farmers are hoping that the government will provide more subsidies to their industry.

Senegal fact file 2023 population 19m gross domestic product (GDP) $31bn workers’ remittances as a percentage of GDP 9% Human Development Index (HDI) value 0.517 Senegal, a north‑east African country, has some of its workers employed in other countries. These workers send a percentage of their wages home to relatives. This money is known as workers’ remittances. Due to their relatively low incomes, most Senegalese households spend all of these remittances. However, some households do not spend all of the money they receive when interest rates are high or when confidence is low. A relatively high proportion of workers in Senegal are employed in agriculture. The crops grown in Senegal are affected by extreme heat and droughts. These weather conditions are one reason why the country grows the crop, sorghum, which does not need much water during its growth. Sorghum is low in calories and so can help people who consume it to lose weight. Senegal is a net exporter of sorghum. It is also the largest African exporter of rice after Nigeria. Greater use of capital equipment in the production of both sorghum and rice could affect productivity. This may reduce the deficit on the current account of Senegal’s balance of payments. The Senegalese Government wants to develop the country’s secondary and tertiary sectors to improve the country’s economic performance. It also expects that this will reduce poverty as measured by those living on $6.85 or less a day. Table 1.1 shows GDP per head and the percentage (%) of population living in poverty in selected countries. Table 1.1 GDP per head and percentage (%) of population living in poverty in selected countries in 2023 percentage (%) of country GDP per head ($) population living in poverty Canada 55 520 0.7 Iceland 73 500 0.0 Papua New Guinea 3 010 80.0 Romania 15 820 7.1 Senegal 1 600 75.6 South Africa 6 770 40.1 A related aim of the Senegalese Government is to increase the country’s HDI value. Governments can use fiscal policy measures to improve the three components of their HDI value, including life expectancy. Changes in fiscal policy can also affect the markets for Senegalese products including gold. Among the influences on the price elasticity of demand for gold are changes in income, the availability of substitutes and the extent to which gold is seen as a luxury.

Japan fact file 2022 Population 125m Total labour force including foreign workers 70m Foreign workers 1.75m Inflation rate 2.5% % of income saved 29% Japan has a high average age of population and a varied economic performance. It has a low birth rate, low inflation rate, good healthcare, high life expectancy and low unemployment rate. Fewer Japanese people enter the labour force each year. It is predicted that Japan’s labour force will fall by 10 million by 2040. Many young Japanese people emigrate to Australia, Canada and the US in search of higher wages. However, Japan now experiences net immigration although foreign workers are currently only a small proportion of Japan’s labour force. To achieve an annual economic growth rate of 1.2%, it has been estimated that the number of foreign workers would have to increase to 7 million by 2040. Some foreign workers are discouraged from working in Japan due to the requirement to pass a Japanese language test. Only the most skilled are allowed to stay for more than 5 years and to bring their families with them. Many Japanese industries are affected by labour shortages and the country’s decline in population. For example, the fall in population has affected the quantity of furniture traded. It has also influenced the country’s air transport industry. Air travel is the most important method of transport in Japan for foreign travel and long-distance internal travel. Japan’s air passenger numbers follow a similar pattern to global air passenger numbers. Table 1.1 shows global GDP per head and global air passenger numbers between 2016 and 2022. Table 1.1 Global GDP per head and global air passenger numbers 2016 – 2022 Year Global GDP per head ($) Global air passenger numbers (billions) 2016 10 217 3.8 2017 10 745 4.1 2018 11 289 4.4 2019 11 356 4.5 2020 10 884 3.3 2021 12 350 2.2 2022 13 200 3.7 Demand for goods and services, including air travel, is influenced by how much people save. Japanese people save a relatively high proportion of their income. This has affected the country’s inflation rate, current account balance of the balance of payments and its economic growth rate. Japan’s macroeconomic performance is also influenced by the mobility of its labour force. There are several reasons why the mobility of Japan’s labour force may change in the future. These include its ageing labour force and possible changes in education and training, house prices and the quality and price of transport.

Malawi fact file 2022 Population 22m Percentage of population with access to electricity 15% Deficit on the current account of the balance of payments 12.9% of GDP Malawi is a low-income East African country. It is often affected by natural disasters including droughts, floods and storms. In January 2022, Malawi was hit by Storm Ana. This damaged agricultural crops, factories, forests and power stations. More than three-quarters of Malawi’s labour force are employed in agriculture. Two of the country’s main crops are tea and sugar. The quantity of tea offered for sale is affected by weather conditions, government subsidies and the price of fertilisers. The global market for sugar has been affected by health reports which identified the possible harmful effects of consuming too much sugar. Three of the priorities of the Malawian Government are to develop new industries, raise education standards and develop more sustainable sources of energy. The proportion of Malawian children who finish their primary education (5–11 years of age) is relatively low. Table 1.1 shows GDP per head and the percentage of children who complete primary education in selected countries in 2022. Table 1.1 GDP per head and the percentage of children who complete primary education in selected countries in 2022 Country GDP per head ($) Children who complete primary education (%) Malawi 650 35 Mauritania 2200 70 Namibia 4900 78 Senegal 1640 60 South Africa 7060 99 Uganda 890 22 Only a small proportion of Malawi’s population has access to electricity. Most households rely on wood and charcoal for cooking and heating. Using wood as a fuel contributes to the destruction of the country’s forests and reduces air quality. The country does, however, get 3000 hours of sunshine a year. This means it could develop solar energy. There would be an initial cost to install solar panels and to reduce the risk of storm damage. Solar energy plants (also known as solar farms) can take up a large area and create visual pollution. However, a successful solar energy industry could decrease Malawi’s imports of fuel and might affect its exchange rate. Malawi’s foreign exchange rate fell in 2022. The country’s currency, the kwacha, bought fewer US dollars. This depreciation affected Malawi’s current account of the balance of payment, its inflation rate and its economic growth rate. Some economists suggested that the Malawian Government should stop the kwacha falling further in value.

Egypt fact file 2022 GDP $469.1bn Population 110.0m Poverty rate 27.9% Unemployment rate 7.2% Egypt has always attracted tourists due to the pyramids and other ancient wonders. However, the tertiary sector is not the only source of economic growth; the primary and secondary sectors also contribute to economic growth. Egypt’s exports include personal travel, oil, citrus fruits, gold and textiles. There has been a building boom recently in Egypt. A new city is being built which requires finance, raw materials and labour. Firms are taking a big risk with this project as they are building houses before demand for them has been confirmed. If incomes fall, for example, the market for housing might be unprofitable. Tourism is a good source of economic growth for Egypt. The country has attractions that were built thousands of years ago and natural attractions such as beautiful beaches and a warm climate. It has good infrastructure and is considered a safe and secure country which also attract tourists. Free market reforms have encouraged more investment in Egypt. Fig. 1.1 shows investment (as a percentage of GDP) and economic growth rates in Egypt, 2015–2021. Percentage 10 (%) 8 2015 2016 2017 2018 2019 2020 2021 Investment (as a % of GDP) Economic growth rates (%) Fig. 1.1 Investment (as a % of GDP) and economic growth rates (%) in Egypt in 2015–2021 Deregulation in education has led to an increase in the number of schools and universities in Egypt. Increased opportunities for education and training will ensure future improvements in living standards. However, the opening of more private schools and universities might increase inequality as private education may remain unaffordable for some income groups. In 2022, the Egyptian currency halved in value against the US dollar. The fall in the value of the currency affected inflation and the purchasing power of Egyptians. However, certain industries such as tourism have benefited from this as holidays in Egypt have become more affordable for non-Egyptians.

As cities experience economic growth, the buildings in the city become taller. This is driven by an increase in the willingness and ability of consumers to live in tall buildings. Changes in the conditions of supply have also increased the number of tall buildings being constructed. However, there is a limit to the height of buildings – above a certain height, the total cost of constructing the building will exceed the total revenue generated.