MONEY AND INFLATION — Economics STD 12 Commerce — Question
Gujarat BoardEnglish MediumSTD 12 CommerceEconomicsMONEY AND INFLATION5 Marks
Question
What are the effects of overpopulation on inflation?
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Answer
$1.$ Introduction:
In India there is $2\%$ annual increase in population, leads to inflation.
High population causes the increase in demand of basic needs and when the supply is insufficient the price level increases.
When the population is constant but their purchasing power increases due to rise of their income then there is an increase in price level.
$2.$ Effects of Over Population on Inflation:
$(1)$ Increase in Demand:
Increase in population leads to increase in demand of goods.
The demand for food, clothes and shelter also increases with the increasing population.
Other side socio-economic wants, education, transportation etc. are the basic necessities which increase the demand due to rise in population.
For giving all the above facilities and services to the people the public expenditure of government increases.
In short, due to rise in population the demand for the things like food grains, clothes, shelter, education, health, transport etc. keeps on rising.
If the scarcity prevails from the above goods then it lead to price rise.
$(2)$ Increase in supply:
By the rise in population it gives adverse effect on savings and investment and supply of goods and services.
If population rise then the income of individuals also increase, but to fulfill the demand for primary goods, their saving capacity decreases because
Per capita income does not rise due to increase in population and
Rise in population increase the unproductive population which decrease the savings.
Savings in the country is nil so investment behind economic development does not take place.
Old techniques of production are being followed instead of new techniques.
Production expenses are so high which creates the inflation.
$3.$ Conclusion:
In short, rise in population give rise to goods and services and on the other side it stops the supply of goods and services.
By this, demand and supply became imbalance and price level keeps on increasing that leads to inflation.
In general sense increase in population leads to inflation.
In other countries so many natural resources are available.
But due to low population it is less utilized while increase in population helps to utilize the unutilized natural resources which increase the production and supply.
In this condition, demand increases but price rise does not occur.
This helps in economical development.
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