Question

3 Difference between national income and per capita income

Answer 1

Answer:

National Income is the aggregate of factor incomes earned by all the factors of production (that are normal residents of a country) within the domestic territory and abroad. It is also known as Net National Product at Factor Cost (NNP FC ). While, Per capita Income is the average income earned per person in an economy during an accounting period. It is estimated by the following formula.

Per capita income = National Income /Total Population

As far as real per capita income is concerned, it is calculated using the given formula,

Real per capita income = Real income/Total Population

An increase in real per capita income leads to an increase in the per capita availability of good and services in the economy. An increase in per capita availability of goods and services in turn leads to an increase in the standard of living of the people. Thus, we can say that a rise in real per capita income leads implies a rise in the welfare of the people in the country.

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