Question

Which concept is also called adjusted per capita income?Why is it adjusted?

Answer 1

Adjusted per capita income is per capita income adjusted for the purchasing power of the dollar.  This adjustment is done for the following reason.

Generally, per capita income is measured in US dollars. Hence, the per capita income of a country is converted from the local currency to the dollar at the market exchange rate. However, this misses the fact that the dollar may have different purchasing power in different countries. In developing countries like India, most products are cheaper than in the US. Hence, simply measuring per capita in US dollars may understate the per capita income in countries like India. Hence, the adjustment is done to reflect the difference in purchasing power.

Answer 2

Adjusted per capita income is per capita income adjusted for the purchasing power of the dollar. This adjustment is done for the following reason.

Generally, per capita income is measured in US dollars. Hence, the per capita income of a country is converted from the local currency to the dollar at the market exchange rate. However, this misses the fact that the dollar may have different purchasing power in different countries. In developing countries like India, most products are cheaper than in the US. Hence, simply measuring per capita in US dollars may understate the per capita income in countries like India. Hence, the adjustment is done to reflect the difference in purchasing power.