What is GDP per capita: definition and function

GDP per capita it’s a economic indicator that measures the relationship between the income level of a country and each of its inhabitants. It is also usually known as income per capita or rent per capita.

The expression is made up of the acronym GDP, which means ‘gross domestic product’, and the Latin words per capita , which means ‘per head’. Thus, it is summarized as the gross domestic product per head of a country.

To measure GDP per capita A formula is used that consists of the following elements: GDP per capita = GDP / number of inhabitants

For example, in a nation that receives a gross domestic product of 300 billion dollars in one year and has 30 million inhabitants, the GDP per capita It will be 10 thousand dollars per inhabitant.

GDP function per capita

THE GDP per capita It is measured annually. Its increase is supposed to reveal the growth of an economy during a certain period.

In theory, this data describes the average of income based on the number of inhabitants, which would allow diagnosing the economic level of society.

However, since it is only an average, this indicator does not allow us to clearly understand how this wealth is distributed among the different individuals in a country, so that economic inequalities are not made visible.

For example, in a country with a GDP per capita than 10 thousand dollars, it often happens that some earn much less and others earn much more. Thus, the GDP per capita It is not a reliable indicator to measure the distribution of wealth but only the totality of income and its investment potential.

In fact, the GDP per capita It does not offer conclusive information on data related to education and health, which are fundamental in evaluating the distribution of wealth.

Variables that affect GDP per capita

There are various variables that affect the performance of GDP per capita. Among them, the increase in the value of products, goods and services developed in the country in question is fundamental, since its growth depends on this.

If there is no growth in production, but instead there is disproportionate growth in population, GDP per capita will be negatively affected.

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