It does not take into consideration cost of living of the person of their country, does not tell that how the wealth is spread in the country, does not take into consideration the details of earnings of the illegal workers in the country as well as the people who are working voluntarily in the country and does not give any indication on the spending power of the people of the country. |~ », Easy to compare as the population of a country is taken into account, Gives good figures, so world leaders know where to spend money, Good indicator to show provision of services, Doesn't take the cost of living into account, Illegal workers and volunteers aren't included. The GDP per capita the UK, on the other hand is $35 100 and was 36 th place in the world. Due to this Real GDP per capita does not tell the exact details of the average income of the country per citizen in a year. Disadvantages of the Real GDP Per Capita. Increases inequality: Sometimes spending more on gross national investments (GNI) per capita can hide the widespread inequality within the country. In 2016, the GNP per capita in the UK was $43000 while in India it was only $1600. ILLUSTRATION 2.3: This value is one of the useful measures for the leaders of the world because it helps the leaders in deciding where the money needs to be spent to use it in the best possible manner. GDP per capita is the gross domestic product of a country, as divided equally between each citizen (capita)Advantage - represents a country's economic productivity and the advancement of its industryAdvantage - easy to rank and measureDisadvantage - doesn't include the contributions of the informal economy (70% in African cities)Disadvantage - can hide inequalities within a nation (e.g… Per capita income is an average and this average may not represent the standard of living of the people, if the increased national income goes to the few rich instead of giving to the many poor. 806 8067 22 Advantages of using GDP/GNP as an indicator: Disadvantages of using GDP/GNP and an indicator: A useful figure for comparing countries. In addition, it is often used to rank countries in order to issue aid payments. 806 8067 22, Registered office: International House, Queens Road, Brighton, BN1 3XE, geography - global development - how development is measured, Economics essay help on GDP and development! There are several different advantages which are as follows: Limitations and drawbacks include the following: Real GDP per Capita helps in measuring almost everything that the country creates in the entire year and is used for comparison of the living standard amongst the countries over the time which reflects the feelings of all the citizens about how prosperous is their country but at the same time it does not take into consideration cost of living of the person of their country, does not tell that how the wealth is spread in the country, does not take into consideration the details of earnings of the illegal workers in the country as well as the people who are working voluntarily in the country and does not give any indication on the spending power of the people of the country. Per-capita GDP is a reasonable measure of a country's standard of living. For example, Gross Domestic Product (GDP) does not account for volunteer work, quality of goods, and GDP can be raised by a disaster. GDP measures exactly what it is said to measure, so it's hard to have disadvantages, but for the purpose of answering: 1) It doesn't take into account illegal and black market trading. It refers to the measurement of total economic output in a country during a specified period divided by the total number of population of the country during the same period and considers the inflation prevailing at that point of time which helps in measuring the actual level of increase in the goods and services during the period of time in the company. The major advantages to using GDP per capita as an indicator of standard of living are that it is measured frequently, widely and consistently. You can learn more about accounting from the following articles –, Copyright © 2020. Therefore, GDP may overestimate living standards in a country. This has disenchanted economists about its efficacy as a true index of development and welfare. There are several "disadvantages" if that's what you want to call them. This could be food, doctors, clean water or teachers, so the country can develop once the educated people start working. Get Revising is one of the trading names of The Student Room Group Ltd. Register Number: 04666380 (England and Wales), VAT No. Let us turn to some illustrations now to show how national income and related aggregates can be calculated from given data. (Source: John Sloman, 2006) Can hide inequalities as it does not show the distribution of wealth. However, this tells you nothing about the distribution, potential, or sustainability of the economy. Advantage of China Economic. A rise in th GDP per capita generally means economic growth and a rise in standard of living for many of the people in the country. From the Blog. GDP doesn't account for quality of goods: Consumers may buy cheap, low-quality, short-lived products repeatedly instead of buying more expensive, longer-lasting goods. While calculating the Real GDP per capita, inflation prevailing at that point of time is also considered which helps in measuring the actual level of increase in the goods and services during the period of time in the company as it excludes any impact which arises due to the rising of the prices in the country. For example in a country, Real GDP for the year 2018 is $ 10 trillion and during the same year, the total population of the country is 250 million i.e., there are 250 million people in the country during the year 2018. It is a Good indicator for showing the provision of the services. Disadvantages include government spending as a positive portion of GDP along with natural disasters and the fact that it does not take into account work done outside of a monetary transaction (housewife cleaning the house and making dinner for example).

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