What is per capita income What is its limitation as a development measure?
Limitations of per capita income are : Show
If you're seeing this message, it means we're having trouble loading external resources on our website. If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked. Per capita income (PCI) or total income measures the average income earned per person in a given area (city, region, country, etc.) in a specified year. It is calculated by dividing the area's total income by its total population. Per capita income is national income divided by population size. Per capita income is often used to measure a sector's average income and compare the wealth of different populations. Per capita income is also often used to measure a country's standard of living. It is usually expressed in terms of a commonly used international currency such as the euro or United States dollar, and is useful because it is widely known, is easily calculable from readily available gross domestic product (GDP) and population estimates, and produces a useful statistic for comparison of wealth between sovereign territories. This helps to ascertain a country's development status. It is one of the three measures for calculating the Human Development Index of a country. Per capita income is also called average income. Per capita income measures the amount of money earned by every person in a particular country, state, or city. It determines the average income of a person in that specific region. It indicates the standard of living and the quality of life of people in the geographical location under consideration. The per capita income of a country is calculated by dividing its national income by its population, including men, women, and children. Per capita income helps study statistics, economics, and many other fields. Importance of Per Capita:Per capita is the measurement of income per person in a defined region, state, or country. It is calculated by dividing the total earned income by the population. It is not the same as the average income of a person because the population includes non-earning members like children etc. It indicates the living standards and quality of life of those residing in that region or country. It is used to compare the economic conditions of different countries. The two most popular parameters in economics related to per capita are as follows: Gross domestic product (GDP) per capita: GDP per capita is a measurement of a country’s average economic output by the people living in the country. The GDP per capita of a country is determined by dividing the country’s total domestic output by its population. The formula for GDP is GDP per capita = Gross domestic product/population. Gross National Income Per Capita: The gross national income per capita is calculated using the same information as used in the calculation of GDP, in addition to any income that results from the income of residents living abroad. The Gross Domestic Product per capita in India, after being adjusted by purchasing power parity (PPP) showed an increasing trend (except in 2020) and was last recorded at 6675.35 US dollars in 2021. Uses of per Capita Income:
The Calculation of per Capita Income:Per capita income is a measurement of the population’s average income per –person and is often used to compare countries’ economic situations with different population sizes. The interpretation of per capita income is essential in determining the standard of livelihood of the population, which is a crucial indicator of a country’s economic development. Per capita income is calculated by using the following formula:Per capita income = Total income of the population/population. For example, if the total population of a geographical area is 5,000 people, and the total income earned by the population is Rs. 10, 00,000 then the per capita income of that region will be: 10,00,000 / 5,000 = Rs. 200 Limitations of Per Capita Income:Per capita income is a reliable and widely used economic metric, but just like any other economic indicator, it also comes with a few limitations. Some of these limitations are as follows:
Important Data on Per Capita Income:
Conclusion:Per capita income is an important parameter to analyze the population’s purchasing power, affordability, and living standards and determine a nation’s economic trends. However, it is essential to note that per capita income is not the only metric to judge the average earnings of people and the socio-economic scenario. It should be used with other income parameters such as savings, wealth, poverty, inflation, welfare opportunities, and income disparities. What is per capita income What is the limitations as a development measure?Per Capita Income has both uses and limitations. It calculates Gross Domestic Product and Gross National Income Per Capita. However, it cannot consider factors such as inflation, poverty, savings and economic welfare.
What is the limitation of per capita income Class 10?The following are the limitations of per capita income: The rise in per capita income is due to a rise in prices. An increase in physical output has no contribution, therefore, it is not a reliable index of economic development.
What is meant by per capita income?Per capita income (PCI) or total income measures the average income earned per person in a given area (city, region, country, etc.) in a specified year. It is calculated by dividing the area's total income by its total population.
Is per capita income a measure of development?Per capita income is a better indicator of development as compared to national income.
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