Optimum Population & the Level of Urbanisation (Cambridge International A-Level Economics)

The optimum population

• Optimum population is defined as the population size at which output per head - and therefore average living standards - is maximised, given a country's existing resources and technology

  • Overpopulation occurs when there are more people in a country or region than can be supported by its resources and technology and leads to

    • Higher levels of pollution
    • Higher crime rates
    • Higher unemployment or underemployment
    • Higher levels of food and water shortages
    • Higher pressure on services such as hospitals and schools

  • Underpopulation occurs when there are more resources available than the population can use effectively and may lead to

    • Fewer people paying tax which can lead to higher taxes
    • Underused resources, which can lead to wastage
    • A shortage of workers
    • Lower levels of exports and production, which affects the wealth of an area
    • Fewer customers for goods and services

Optimum theory of population

• The optimum population results in the highest standard of living

  • There are not so many people or so few resources that the standard of living falls
  • There are enough people to develop the resources of the country

Limitations of the concept

• Output per head is an imperfect measure of living standards - the distribution of output matters
• The optimum is never precisely observable in practice
• Technology can continuously expand the productive capacity of a given population, making the concept dynamic and difficult to apply

Level of urbanisation

• Urbanisation is defined as the process by which an increasing proportion of a country's population lives in urban areas - cities and towns - rather than rural areas

  • It is measured as the percentage of the total population living in urban settlements

• Urbanisation is strongly correlated with economic development

  • High-income economies typically have urbanisation rates above 80%, while low-income economies may be below 40%

Causes of urbanisation

• Rural-urban migration

  • Individuals move from rural areas to cities in search of higher wages, better employment opportunities and improved access to services
  • This is the primary driver of urbanisation in developing economies

• Natural population growth in cities

  • Urban birth rates exceeding urban death rates add to city populations independently of migration

• Reclassification

  • As settlements grow, areas previously classified as rural are reclassified as urban, raising measured urbanisation rates without actual migration

Consequences of urbanisation

Urbanisation and development

• Low-income economies tend to have lower urbanisation rates but are urbanising rapidly

  • Sub-Saharan Africa is the fastest urbanising region in the world

• The relationship between urbanisation and development is not automatic

  • Rapid urbanisation without corresponding industrial growth produces "urbanisation without development", characterised by large informal sectors and urban poverty rather than rising productivity

Case Study Indonesia — urbanisation and Jakarta, 1990–2023

The context

Indonesia's urbanisation rate rose from approximately 31% in 1990 to 58% by 2023, driven primarily by rural-urban migration into Jakarta and other major cities as manufacturing and services expanded.

Actions taken

• Rural workers migrated to Jakarta in search of higher wages in manufacturing, construction and the informal service sector
• The government invested in urban infrastructure but consistently struggled to match the pace of population growth
• In 2019 the government announced plans to relocate the capital to Nusantara in Borneo, partly in response to Jakarta's chronic overcrowding, flooding and land subsidence

Outcomes

• Agglomeration in Jakarta raised productivity and incomes, contributing to Indonesia's GDP per capita rising from around $800 in 1990 to over $4,900 by 2023
• However, rapid urbanisation outpaced formal job creation — Jakarta's large informal sector and sprawling low-income settlements illustrate "urbanisation without development"
• Environmental costs, including severe air pollution, regular flooding and sinking land, undermined living standards for many urban residents despite rising average incomes

Exam Hint The optimum population is a theoretical concept - examiners will penalise students who treat it as a fixed or measurable number. Always emphasise that it shifts with technology and capital accumulation, and that it cannot be observed directly in practice.

For urbanisation questions, the key evaluation point is that rapid urbanisation does not automatically produce development - where urban growth outpaces industrial job creation, the result is an expansion of the informal sector and urban poverty rather than rising productivity.