GDP Per Capita Formula Explanation: UGC-NET Notes

Gross Domestic Product (GDP) per capita is a key economic indicator that measures the average income or output per person in a country. It is calculated by dividing the total GDP of a country by its population. GDP per capita provides valuable insights into the economic well-being and standard of living of a nation's residents. Understanding how GDP per capita is calculated and interpreted is essential for assessing economic growth and development, comparing living standards across countries, and formulating policies to improve living conditions.

GDP per capita formula is a very vital topic to be studied for the commerce related exams such as the UGC-NET Commerce Examinations. GDP per capita formula is one of the most asked topics in business economics and learners are expected to know this topic in depth.

In this article, the learners will be able to know about the following:

• GDP meaning
• GDP per capita
• GDP per capita formula
• Nominal gdp per capita formula
• Growth rate of real gdp per capita formula

GDP Meaning

Gross Domestic Product (GDP) is a key economic indicator that measures the total value of all goods and services produced within a country's borders during a specific period, typically a year or a quarter. It is a comprehensive measure of a nation's economic activity and is often used to gauge the overall health and performance of an economy.

GDP Per Capita

Gross Domestic Product (GDP) per capita is a measure that represents the average economic output or income per person within a country. It is calculated by dividing the total GDP of a country by its population. 

GDP per capita provides valuable insights into the economic well-being and standard of living of a nation's residents. A higher GDP per capita generally indicates a higher average income or output per person, suggesting greater economic prosperity and a higher standard of living. However, GDP per capita alone does not provide a complete picture of a country's overall well-being, as it does not account for factors such as income inequality, distribution of wealth, or non-market activities. GDP per capita is a widely used indicator for comparing living standards across countries, tracking changes in economic development over time, and informing policy decisions related to economic growth and development.

GDP Per Capita Formula

The formula for GDP per capita is:

GDP per capita=Total GDP/Population

Nominal GDP Per Capita Formula

The formula for nominal GDP per capita is straightforward:

Nominal GDP per capita=Nominal GDP/Population

Where:

• Nominal GDP represents the total value of goods and services produced within a country's borders during a specific period, typically a year or a quarter, measured in current prices without adjusting for inflation.
• Population refers to the total number of people living in the country during the same period.

Dividing the nominal GDP by the population gives us the average economic output or income per person within the country for that period, without adjusting for changes in price levels. 

Growth Rate of Real GDP Per Capita Formula

The growth rate of real GDP per capita can be calculated using the following formula:

Growth rate of real GDP per capita={(Real GDP per capita final year−Real GDP per capita initial year)/Real GDP per capita initial year}×100%

• Real GDP per capita final year is the real GDP per capita in the final year of the period.
• Real GDP per capita initial year is the real GDP per capita in the initial year of the period.

This formula calculates the percentage change in real GDP per capita over a specific period, typically expressed as a percentage. Real GDP per capita accounts for changes in price levels (inflation or deflation) by adjusting nominal GDP per capita using a price index, such as the GDP deflator or the Consumer Price Index (CPI), to reflect changes in purchasing power. 

Conclusion

In conclusion, GDP per capita formula provides a straightforward way to measure the average economic output or income per person within a country. By dividing the total GDP of a country by its population, we obtain a metric that reflects the economic well-being and standard of living of the nation's residents. This indicator is valuable for comparing living standards across countries, tracking changes in economic development over time, and informing policy decisions related to economic growth and development.

GDP per capita formula is a vital topic as per several competitive exams. It would help if you learned other similar topics with the Testbook App.