Difference Between GDP and GDP per Capita
Gross Domestic Product (GDP) and Gross Domestic Product per Capita (GDP per Capita) are two important economic indicators used to measure the economic performance of a country. While both GDP and GDP per Capita are related, they are different measures that provide unique insights into a country's economic activity. In this article, we will explore the definitions, differences, relationship, examples, advantages, disadvantages, and comparison between GDP and GDP per Capita.
What is GDP?
Gross Domestic Product (GDP) is the total value of all goods and services produced within a country's borders over a specific period, usually a year. It includes all final goods and services produced for consumption or investment purposes, whether produced by domestic or foreign companies operating within the country's borders. GDP is a widely used indicator of a country's economic performance and is often used to compare economic growth between countries.
What is GDP per Capita?
Gross Domestic Product per Capita (GDP per Capita) is a measure of the total economic output of a country divided by its population. It represents the average economic output per person in a country over a specific period, usually a year. GDP per Capita is used as an indicator of the standard of living in a country, as it reflects the amount of economic output available to each person.
Differences between GDP and GDP per Capita
The main difference between GDP and GDP per Capita is that GDP measures the total economic output of a country, while GDP per Capita measures the average economic output per person. Here is a table summarizing the differences between GDP and GDP per Capita:
| GDP | GDP per Capita |
|---|---|
| Measures the total economic output of a country | Measures the average economic output per person |
| Does not take into account the size of the population | Takes into account the size of the population |
| Used to compare economic growth between countries | Used as an indicator of the standard of living in a country |
Relationship between GDP and GDP per Capita
GDP and GDP per Capita are related in that GDP is used to calculate GDP per Capita. The formula for calculating GDP per Capita is as follows:
GDP per Capita = GDP / Population
Where GDP is the total economic output of a country and Population is the number of people living in the country. Therefore, an increase in GDP will lead to an increase in GDP per Capita if the population remains constant, and vice versa.
Example:
Let's say that Country A has a GDP of $1 trillion and a population of 100 million. Country B has a GDP of $500 billion and a population of 50 million. The GDP per Capita for each country would be calculated as follows:
Country A: GDP per Capita = $1 trillion / 100 million = $10,000 Country B: GDP per Capita = $500 billion / 50 million = $10,000
In this example, both countries have the same GDP per Capita, despite having different GDPs and populations.
Advantages of using GDP per Capita:
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Provides a more accurate reflection of the standard of living in a country by taking into account the size of the population.
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Can be used to compare the economic performance of countries with different population sizes.
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Useful in making policy decisions related to improving the economic well-being of individuals in a country.
Disadvantages of using GDP per Capita:
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Does not take into account income inequality within a country.
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Can be affected by migration and changes in the population size.
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Does not provide information on the distribution of economic output among the population.
Comparison between GDP and GDP per Capita
Here is a table summarizing the differences, advantages, and disadvantages of GDP and GDP per Capita:
| GDP | GDP per Capita |
|---|---|
| Measures the total economic output of a country | Measures the average economic output per person |
| Does not take into account the size of the population | Takes into account the size of the population |
| Used to compare economic growth between countries | Used as an indicator of the standard of living in a country |
| Advantages: can be used to compare economic growth between countries | Advantages: provides a more accurate reflection of the standard of living in a country |
| Disadvantages: does not provide information on the distribution of economic output among the population | Disadvantages: does not take into account income inequality within a country |
Difference between GDP and GNP
Gross National Product (GNP) is another economic indicator that is closely related to GDP. While GDP measures the economic output of a country within its borders, GNP measures the economic output of a country's citizens, regardless of where they are located. GNP includes the value of goods and services produced by a country's citizens, even if they are located outside the country's borders. The main difference between GDP and GNP is that GDP only measures economic activity within a country's borders, while GNP measures economic activity by a country's citizens, regardless of where they are located.
GDP per Capita by Country:
GDP per Capita varies significantly between countries. Some countries have a very high GDP per Capita, while others have a very low GDP per Capita. Here are the top 10 countries with the highest GDP per Capita in 2021:
- Qatar - $128,702
- Macao SAR - $114,363
- Luxembourg - $112,622
- Singapore - $94,105
- Brunei Darussalam - $80,156
- Ireland - $79,104
- Norway - $77,976
- United Arab Emirates - $68,776
- Kuwait - $63,296
- Switzerland - $61,071
GDP per Capita Ranking:
The International Monetary Fund (IMF) publishes a list of countries ranked by GDP per Capita each year. The ranking provides an overview of the relative economic well-being of countries around the world. The 2021 GDP per Capita ranking of the top 10 countries is as follows:
- Qatar - $128,702
- Macao SAR - $114,363
- Luxembourg - $112,622
- Singapore - $94,105
- Brunei Darussalam - $80,156
- Ireland - $79,104
- Norway - $77,976
- United Arab Emirates - $68,776
- Kuwait - $63,296
- Switzerland - $61,071
GDP per Capita Growth:
GDP per Capita growth is a measure of how much the average income of individuals in a country has increased over a specific period. A positive GDP per Capita growth rate indicates that the standard of living of individuals in a country is improving. Here is a table showing the GDP per Capita growth rates of some countries in 2021:
| Country | GDP per Capita Growth Rate |
|---|---|
| United States | 1.9% |
| China | 8.1% |
| India | -10.3% |
| Japan | -3.9% |
| Germany | -5.1% |
| United Kingdom | -9.9% |
How is GDP per Capita Calculated?
GDP per Capita is calculated by dividing the total economic output of a country (GDP) by the total population of the country. The formula for calculating GDP per Capita is as follows:
GDP per Capita = GDP / Population
For example, if a country has a GDP of $1 trillion and a population of 100 million, the GDP per Capita would be:
GDP per Capita = $1 trillion / 100 million = $10,000
This means that the average economic output per person in the country is $10,000.
Difference between GDP and per Capita Income
Per Capita Income is another economic indicator that is related to GDP per Capita. While GDP per Capita measures the average economic output per person in a country, per Capita Income measures the average income per person in a country. Per Capita Income includes all forms of income, such as wages, salaries, and investment income. GDP per Capita, on the other hand, only measures economic output.
The main difference between GDP per Capita and per Capita Income is that GDP per Capita measures economic output, while per Capita Income measures income. GDP per Capita can be used to compare the economic growth of different countries, while per Capita Income can be used to compare the income levels of different countries.
Conclusion:
In conclusion, GDP and GDP per Capita are important economic indicators that provide insight into the economic well-being of a country. GDP measures the total economic output of a country, while GDP per Capita measures the average economic output per person. While GDP can be used to compare economic growth between countries, GDP per Capita provides a more accurate reflection of the standard of living in a country. However, GDP per Capita does not take into account income inequality within a country. Additionally, while GDP per Capita and per Capita Income are related, they measure different aspects of a country's economy.
