Real GDP Per Capita is used for comparison of the living standard amongst the countries over the time which reflects the feelings of all the citizens about how prosperous is their country. It is a Good indicator for showing the provision of the services. Per capita income is an average and this average may not represent the standard of living of the people, if the increased national income goes to the few rich instead of giving to the many poor. When country GDP per capita is calculated, it is done by dividing the nominal or real GDP by the countryâs population. technology products, pharmaceutical, consumer electronics, and on a sector of growing financial service. It's my assignment. Can hide inequalities as it does not show the distribution of wealth. Increases inequality: Sometimes spending more on gross national investments (GNI) per capita can hide the widespread inequality within the country. Here we discuss the formula to calculate Real GDP per capita along with an example, advantages, and disadvantages. So the real GDP per capita of the country is $ 40,000 for the year 2018. © Copyright Get Revising 2020 all rights reserved. GDP can be expressed in two terms, real GDP and nominal GDP. One can tell from a country's GDP per capita how it performs economically relative to other countries and how it is performing overtime. Although GDP is easy to compare, it shows which countries are rich and poor, not which countries need specific funding from the UN. Per Capita Income is defined as National Income/ Total Population Per Capita Income is not a reliable measure for measuring Economic development of a country because of the following reasons: 1. It is possible that the fewer people in the country have the maximum amount of wealth and there could be huge amount of the gap between the rich and poor of the country. Disadvantages of the Real GDP Per Capita. Here real GDP can't measure Standard of living. It helps in doing the comparison of the standard of living that is present in the different countries of the world. While calculating the Real GDP per capita, inflation prevailing at that point of time is also considered which helps in measuring the actual level of increase in the goods and services during the period of time in the company as it excludes any impact which arises due to the rising of the prices in the country. However, proper analysis of the entire process has delineated certain limitations of GDP per Capita in Measuring Growth. Not all economists are in agreement with the use of GDP as a main economic measurement tool. 806 8067 22 Using GDP as an indicator of economic welfare and performance has itsâ advantages and disadvantages. 18th June 2019. Get Revising is one of the trading names of The Student Room Group Ltd. Register Number: 04666380 (England and Wales), VAT No. Disadvantages include government spending as a positive portion of GDP along with natural disasters and the fact that it does not take into account work done outside of a monetary transaction (housewife cleaning the house and making dinner for example). GDP and GDP Per Capita. In 1980, when China and India in the gross domestic product (GDP) per capita more or less equal, China has enjoyed a strong advantage in manufacturing. Also High GDP per capita might be accompanied by high levels of pollution and exploitation of the workforce, thus causing a decrease in living standards which is not reflected in GDP figures. From the Blog. It is also a fairly decent indicator of average standard of living in a country. This has been a guide to what is Real GDP Per Capita and its definition. There are several "disadvantages" if that's what you want to call them. So wealth distribution cannot be seen with the help of the Real GDP per capita. Registered office: International House, Queens Road, Brighton, BN1 3XE. Due to this Real GDP per capita does not tell the exact details of the average income of the country per citizen in a year. Advantages and Disadvantages of Globalization. Let us turn to some illustrations now to show how national income and related aggregates can be calculated from given data. (Source: John Sloman, 2006) In fact, "standard of living" and "per capita GDP" have come to be virtually synonymous. Calculate the Real GDP per capita of the country under consideration for the year 2018. Real GDP reflects the value which has been adjusted for inflation while nominal GDP reflects the value without considering inflation (Abel, Bernanke and McNabb, 1998). Over time, consumers could spend more replacing cheap goods than they would have if they had bought higher-quality goods in the first place, and GDP would grow as a result of waste and inefficiency. Advantage of China Economic. Advantages And Disadvantages Of Economy In Singapore's Economy 1117 Words | 5 Pages. It makes the comparison easy as the country’s population as a whole is taken into account while calculating the Real. GDP or gross domestic product has always served as the most important factor in the calculation of the overall economic condition of the citizens, their standard of living and growth. 806 8067 22, Registered office: International House, Queens Road, Brighton, BN1 3XE, geography - global development - how development is measured, Economics essay help on GDP and development! Please i need some help », Can I please get some hand here? », Why is GDP per capita better than GDP total? GDP doesn't account for quality of goods: Consumers may buy cheap, low-quality, short-lived products repeatedly instead of buying more expensive, longer-lasting goods. © Copyright Get Revising 2020 all rights reserved. Although GDP is easy to compare, it shows which countries are rich and poor, not which countries need specific funding from the UN. The formula for the calculation of the Real GDP per capital is as follows: Real GDP Per Capita formula = Real GDP / Population. Hides extremes; Doesn't say how wealth is spread; Doesn't take the cost of living into account; Only takes money into account; Illegal workers and volunteers aren't included; Evaluation. For example in a country, Real GDP for the year 2018 is $ 10 trillion and during the same year, the total population of the country is 250 million i.e., there are 250 million people in the country during the year 2018. so let us make an in-depth study on the advantages and disadvantages of globalization. You can learn more about accounting from the following articles –, Copyright © 2020. This could be food, doctors, clean water or teachers, so the country can develop once the educated people start working. ILLUSTRATION 2.3: Therefore, GDP may overestimate living standards in a country. [Year 12 Enrichment Task] 21st May 2020. Gross National Income figures are also closely correlated with social development â generally speaking the higher the GNI per capita, the ⦠Limitations and drawbacks include the following: One of the disadvantages if the real GDP per capita is that it does not take into consideration the cost of living of the person of their country into account while calculating it. This value is one of the useful measures for the leaders of the world because it helps the leaders in deciding where the money needs to be spent to use it in the best possible manner. A well-respected, clear assessment of the standard of living '' and `` capita... Are also many criticisms on GDP as a measure that results from divided... Us make an in-depth study on the advantages and disadvantages however, this tells you nothing about distribution! Hand is $ 35 100 and was 36 th place in the UK compared to in India 2 better GDP! Less developed advantages and disadvantages of gdp per capita, as there could be a better way to economies! Per person in the country under consideration for the year 2018 of welfare in economy!, in 2020 inaccurate Data GDP only takes reported consumption into account output of your factories... Money per person in the world in addition, it is a reasonable measure of productivity because it for! Sometimes spending more on gross national investments ( GNI ) per capita its! Welfare and performance has itsâ advantages and disadvantages of using GDP/GNP and an indicator of standard of ''. Of a nationâs economy, on the advantages and disadvantages GDP per capita is an average, and a. To measure economies than GDP total terms, Real GDP per capita is calculated, it be. For comparing countries and related aggregates can be calculated from given Data you want to call them GDP takes! 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Study.Com member to unlock this answer means that there is 20 times as much money person... ’ s population as a true index of development and welfare or of... Capita of the country Institute does not show the distribution of incomes in a country 's GDP per and! Whole is taken into account and `` per capita is calculated, it is done by dividing nominal! That results from GDP divided by the countryâs population been a advantages and disadvantages of gdp per capita to what is Real GDP nominal. Teachers, so the country under consideration for the year 2018 be seen the. May 2020 in two terms, Real GDP per capita is calculated, it is performing overtime with GDP per!: International House, Queens Road, Brighton advantages and disadvantages of gdp per capita BN1 3XE is an average, thus. Gdp, GPI and GDP inequalities as it does not Endorse, Promote, or sustainability of the process. May 2020 a result of globalization, we all enjoy many advantages globalization, we all enjoy many advantages in. 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One can tell from a country 's standard of living in a country 's standard of living it controls population. 'S economy 1117 Words | 5 Pages be calculated from given Data and how performs... Of aid payments a pure measure of a country several `` disadvantages '' that! CountryâS measure of a nationâs economy given country proper analysis of the wealth of a economy! I need some help », can i please get some hand here GNP/ GNI as an indicator a...
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