Declining population This refers to a situation where population size is falling due to need to keep families small due to migration of the population to other areas.
Effects of a declining population
- Decline in aggregate demand hence reduction in market size. The demand for goods and services decreases due to reduction in number of consumers.
- Reduced pressure on government to provide social services. There is reduced pressure on government to provide social infrastructures, education and health since the number of people requiring the services is falling.
- Decline in the level of investments. The level of investment falls due to inability of market to sustain productive industries. Some of the existing industries may collapse and close down.
- Attainment of optimum. Where the economy was over-populated, a decline in population size may enable it to attain the desirable optimum size.
- Reduced levels of unemployment. As population of an economy reduces, labour supply also falls. This leads to a reduction in the level of unemployment.
- Decline in labour supply. When population in an economy declines, labour supply also decreases. This may lead to a decline in output and increase in labour costs if the economy was not experiencing unemployment.