Step ➊ : Introduce

Population refers to the total number of inhabitants in a particular country. Some countries such as Nauru have a relatively small population size compared to other countries, and this has several effects on their economy. In this essay, we will discuss the advantages and disadvantages for the economy of having a relatively small population.


Step ➋ : Discuss the advantages of a relatively small population.

There are several benefits to an economy with a small population.

➤ 2.1 With a relatively small population, there will be less pressure on the economy’s scarce resources.

Resources will last over a longer period of time and will be available for future generations. This will enable economic growth to continue. A smaller population will also put less strain for the environment.For example, there will be less traffic congestion and pollution.

➤ 2.2, In a small population, there may be a smaller proportion of dependants, such as children or the elderly.

This means that the government will be able to reduce its spending on public services such as education, welfare benefits and pension schemes. This will enable the government to spend more in other areas such as infrastructure.

➤ 2.3 There will be less demand for imports in a small population.

This is because the country should be able to to produce enough to meet the need and wants of consumers. This will result in a better current account position in the balance of payments.


Step ➌: Discuss the disadvantage of a small population.

Having a relatively small population may also have several disadvantages.

➤ 3.1 The country will not have sufficient labour to make the best use of its resources.

Specialisation and division of labour are also not possible in countries with a small population. As the supply of labour is limited, specialization and rationalization schemes can’t be undertaken. Consequently, as there will not be a productive and efficient use of resources, there will be a low per capita income and slower economic growth.

➤ 3.2 A smaller population means that there will be a smaller workforce and the government will not be able to raise as much tax revenue.

This will reduce the ability of the government to spend. This may result in a lower quality public sectors services such as education and healthcare.

➤ 3.2 Setting up in a country with a small population is a disadvantage for large companies. This is because there may not be enough demand for goods and services.

When there is not enough demand for goods and services, firms may not be able to take advantage of economies of scale as they cannot produce a large amount of output. Companies will not be able to spread their fixed costs over more units of production. This is less attractive to MNCs.


Step ➍ : Conclude whether having a relatively small population is an advantage or a disadvantage.

To conclude a small population can be a major disadvantage in terms of slower economic growth. This mainly occurs because of labour shortages and lack of demand. In order to overcome this problem, the government can encourage immigration or implement other measures to reach the optimum population size. The optimum population exists when the output of goods and services per head of the population is maximised.