Answer to Question #86200 in Microeconomics for Nara

Question

Too much Labour but not enough capital. Is this the most significant difference between a developing and a developed economy?

Answer 1

It is true that too much labour but not enough capital is one of the main differences between a developing nation and a developed country. It is the case because developed nations often have a high per capita income and are more industrialized than the developing nations. On the other hand, the per capita income in developing countries is low, and industrialization also tends to be low. It is the case because the economies in developing nations do not have adequate resources to support the labour force in the market, which would explain the high unemployment in developing economies. On the other hand, developed nations have enough capital to support their industries, which explains the high per capita income, better use of resources, and high industrialization.