Real GDP per Capita measures the average level of national income (adjusted for inflation) per person. In other words, Real GDP measures the actual increase in goods and services and excludes the impact of rising prices. Real GDP per capita takes into account the average GDP per person in the economy.

Real GDP Per Capita Formula refers to the formula that is used in order to calculate the country’s total economic output with respect to per person after adjusting the effect of the inflation and as per the formula Real GDP Per Capita is calculated by dividing the real GDP of the country (country’s total economic …

Real GDP per capita provides a better way to compare economies because no two counties are like so it takes into consideration GDP – every country is on different economic level and population – there is differences between populations of every country.

Real GDP per capita is a measurement of the total economic output of a country divided by the number of people and adjusted for inflation. It’s used to compare the standard of living between countries and over time.

Although there is not clear agreement as to what the correct measure for quality of life is, there is a clear consensus that use of GDP per capita as a measure of quality of life is misleading and detrimental to policymaking due to the influence it wields over what societies value.

Since per capita income uses the overall income of a population and divides it by the total number of people, it doesn’t always provide an accurate representation of the standard of living. In other words, the data can be skewed, whereby it doesn’t account for income inequality.

GDP per capita is an average, and thus ignores the distribution of incomes in a given country. Although the GDP per capita of a country may be very high, it may be the case that 10 percent of the country earn millions of times more than the other 90 percent of the country’s inhabitants, who earn extremely low wages.

1. INDICATOR (a) Name: Gross domestic product (GDP) per capita. The growth in real GDP per capita ndicates the pace of income growth per head of the population. As a single composite indicator it is a powerful summary indicator of economic development.

Population When populations are different from country to country and the countries are producing a similar amount of a product than it gives us an inaccurate picture of the standard of living because one country is taking the same amount of production and distributing it amongst a larger population.

Advantages

• Easy to compare as the population of a country is taken into account.
• Gives a figure for every country.
• Gives good figures, so world leaders know where to spend money.
• Good indicator to show provision of services.

1) It does not indicate the disparities in the distribution of income e.g. it does not show the wide gap between the incomes of very rich and the very poor people. It is just a mean value so, it does not reflect the income distribution. 2) It does not reflect the living standard of the people of a specific area.

Key Takeaways The standard of living is derived from per capita GDP, determined by dividing GDP by the number of people living in the country. Generally, rising global income translates to a higher standard of living, while diminishing global income causes the standard of living to decline.