Question

difference between total income and average income which one between indicator of economic

Answer 1

Both the measures are used to draw conclusions about population’s economic health in a country. However one depicts the same in terms of per person and other in terms of per household.

GDP per capita -

It is a measure of a country’s economic output per person.

It is calculated by dividing country’s GDP by its total population.

It depicts the country’s residents standard of living. However it is a mean value and it does not reflect income distribution. If a country’s income distribution is skewed i.e high income inequality exists, a small wealthy class can increase per capita income substantially while majority of the population has very less income vis-a-vis the average one. In such cases median value gives a more accurate picture than mean.

Average household income -

A household refers to a single housing unit and all of the people that live in it. And their income combined will give us total income of the household.

Mean or median household income, both are good indicators of standard of living but median value is considered by many statisticians to be a better indicator than the mean household income as it is not dramatically affected by unusually high or low values.The median income is the income level in the middle of a list of ranked incomes.

Therefore average household income would be total income earned by a household in a series where half of the households earn more and half less to this particular datapoint.

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