What is per capita income?what are its demerits to be taken as index comparison
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Per Capita Income :-
Per Capita Income is the amount of money per person in a specific area. In simple words, it is the money earned by every citizen in the last 12 months of a specific geographic area, whether it be a country or a state or a city. Often, the per capita income is calculated for cities and countries. It helps us address issues like the quality of life and the living conditions we can expect for specific areas.
It is calculated by dividing the total income of a specific city, state or a country by its population. This is used to compare the wealth of one population with those of the others.
Demerits of Per Capita Income :- Following are the demerits of per capita income.
1) It does not indicate the disparities in the distribution of income e.g. it does not show the wide gap between the incomes of very rich and the very poor people. It is just a mean value so, it does not reflect the income distribution.
2) It does not reflect the living standard of the people of a specific area. It is just an average and this average may not represent the real standard of living of the people.
3) Comparison of per capita income over time also needs to consider inflation factor because without adjusting for inflation, the figures of average income will not show the clear picture of economic growth.
4) Per capita income does not consider whether the income is invested in factors to improve the area's development, such as health, education, or infrastructure.
5) Per capita income criterion takes into account only the economic aspect of life and ignores the social aspect of life.
6) Per capita income also ignores non-materialistic things like pollution, environment, peace, democracy etc.
7) It does not describe all the conditions which are necessary to be a developed nation.
Per Capita Income is the amount of money per person in a specific area. In simple words, it is the money earned by every citizen in the last 12 months of a specific geographic area, whether it be a country or a state or a city. Often, the per capita income is calculated for cities and countries. It helps us address issues like the quality of life and the living conditions we can expect for specific areas.
It is calculated by dividing the total income of a specific city, state or a country by its population. This is used to compare the wealth of one population with those of the others.
Demerits of Per Capita Income :- Following are the demerits of per capita income.
1) It does not indicate the disparities in the distribution of income e.g. it does not show the wide gap between the incomes of very rich and the very poor people. It is just a mean value so, it does not reflect the income distribution.
2) It does not reflect the living standard of the people of a specific area. It is just an average and this average may not represent the real standard of living of the people.
3) Comparison of per capita income over time also needs to consider inflation factor because without adjusting for inflation, the figures of average income will not show the clear picture of economic growth.
4) Per capita income does not consider whether the income is invested in factors to improve the area's development, such as health, education, or infrastructure.
5) Per capita income criterion takes into account only the economic aspect of life and ignores the social aspect of life.
6) Per capita income also ignores non-materialistic things like pollution, environment, peace, democracy etc.
7) It does not describe all the conditions which are necessary to be a developed nation.
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Answer:
Per capita income is the total income of a country divided by the total number of people (population).
Demerits of per capita income:-
- It doesn't show the difference between the income of people.
- The lifestyle of a country or a state cannot be defined by the per capita income. A rich and a poor country or a state may have the same per capita income.
- Other criterias like life expectancy and infant mortality rate are also important for measuring development of a country or a state.
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