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Discuss the drawbacks of GDP per head as an indicator of living standards and suggest what improvements might be made to produce a more useful measure.
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Discuss the drawbacks of GDP per head as an indicator of living standards and suggest what improvements might be made to produce a more useful measure. The normal way of comparing the economic well-being of a nation or the individuals in the nation, is usually by using per capita income. This is the average income per head of the country. It is obtained by dividing the GDP (Gross Domestic Product) by the population. Using this method, the living standards between countries, and also living standards within a country overtime can be compared. However, there are a number of reasons why this may not be an accurate guide to measuring the living standards of a country, or the individuals living in the country. Firstly, per capita income ignores the effects of inflation. If prices rise more rapidly in one country than in another, per capita income will be artificially inflated. In order...
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