The term per capita originates from Latin and translates to "per person". A per capita measure:
- Calculates the average value of a metric (such as GDP, GNI, income, or expenditure) for each individual in a country.
- Allows to make comparison accounting for different population sizes across countries.
- Allows accurate comparisons over time that account for population growth.
GDP per capita is calculated as:
$$\text{GDP per capita} = \frac{\text{Total GDP}}{\text{Population}}$$
Similarly, GNI per capita is calculated as:
$$\text{GNI per capita} = \frac{\text{Total GNI}}{\text{Population}}$$
ExampleUtilising per capita values to make comparison across countries
Total GDP alone does not give a complete picture of economic performance or living standards when populations vary. For example:
- Country A:
- GDP = €10 billion,
- Population = 1 million,
- GDP per capita = €10,000
- Country B:
- GDP = €10 billion,
- Population = 2 million,
- GDP per capita = €5,000
While total GDP is the same, Country A’s per capita GDP is double that of Country B, highlighting the significant difference in individual economic resources.
Real GDP/GNI per person (per capita) at purchasing power parity (PPP)
Purchasing power
The ability of a given amount of money to buy goods and services, which depends on the prices of those goods and services. A fixed amount of money with higher purchasing power can buy more goods and services than the same amount with lower purchasing power.
- Countries' economies have varying purchasing powers because the prices of goods and services differ across nations due to factors like local production costs, wages, and market conditions.
