Question

How per capita income and GDP of a country is inter related.

Answer 1

 GDP can be measured in two different ways – first on a “factor payments” basis and second on a “market price”

The difference between these two measures is indirect taxes like VAT, which are included in market prices but do not represent anyone’s income in any direct way. In that sense, only when GDP is stated on a factor payments basis does it literally equal the total income received from domestic production.

GDP measures only that portion of domestic residents’ income received from domestic production of final goods and services. It excludes any additional income received by those residents from their contribution to production that takes place in other countries. Adding net income received by domestic residents from production abroad to their income from domestic production yields a more comprehensive measure of “income per capita,” namely Gross National Income per capita.

Answer 2

Explanation:

The economic status of countries is vital due to a number of reasons, and many methods are used to measure the economic conditions. GDP per capita and income per capita are two such pioneer measures that are partly considered the same. This is due to the fact that GDP can also be used to calculate income per capita. The key difference between GDP per capita and income per capita is that GDP per capita is the measure of the total output of a country where the Gross Domestic Product (GDP) is divided by the total population in the country whereas income per capita is a measure of income earned per person in a country within a given period of time.