Question

Mention two basic characteristics of an underdeveloped economy.

Mention three/four characteristics of an underdeveloped economy.

Answer 1

1. Low per capita income: Per capita income is very low, resulting in a large proportion of the population living below the poverty line. This is due to low productivity, low savings and investment rates, outdated technology, and underdevelopment of resources.
2. Predominance of agriculture: Most underdeveloped countries have economies in which agriculture is the main occupation, employing about 70 to 85 percent of the population and contributing about 50 percent of national income. The economy largely depends on agricultural products and raw materials for exports.
3. Rapid growth of population: Underdeveloped countries tend to have high population growth rates due to high birth rates and reduced mortality rates, which strain the economy.
4. Lack of capital: There is a deficiency of capital, which limits investment and economic growth.
5. Vast inequalities in the distribution of income: There is widespread inequality, with a large share of national income concentrated in a small section of society, leaving the majority with a small share.