Difference Between GDP and GDP per Capita

GDP vs GDP per Capita

For a lot of reasons, we need to measure our nation’s economic state and when trying to determine a nation’s economic performance, the term GDP is often encountered or used. GDP, which stands for Gross Domestic Product, is a measure describing the value of a countryís economy. Despite plenty of criticisms from respected authorities in economy, GDP is still the most popular method to indicate a country’s economic state.

GDP takes into account all of the goods produced and services made available in a country over a specific period of time. Often, GDP is obtained quarterly and annually. GDP is a number that will ultimately indicate the overall economic health of the country. Though still widely accepted, it is not without significant flaws. Many bodies have already proposed and some had already implemented — alternate formulas or measures to gauge economic well-being.

GDP per capita is a measure that results from GDP divided by the size of the nation’s overall population. So in essence, it is theoretically the amount of money that each individual gets in that particular country. The GDP per capita provides a much better determination of living standards as compared to GDP alone.

National income is naturally proportional to its population so it is only fitting that with the increase of the number of people, there is also an increase in GDP. However, it does not entirely mean that with high GDP, a high standard of living also results.

A country with high GDP but with an overwhelmingly large population will result in a low GDP per capita; thus indicating a not so favorable standard of living since each citizen would only get a very small amount when wealth is being evenly distributed. A high GDP per capita, on the other hand, simply means that a nation has a more efficient economy.

Having said those, GDP per capita is a more reliable measure for determining the economic state of a nation in an individual perspective. India may have a very high GDP but the standard of living is rather low because of the nationís extremely large population. In contrast, Luxembourg with its not so impressive GDP will rank as one of the highest GDP per capita because of its small population. Life in such country is much more rewarding indeed — as clearly indicated by its GDP per capita.

Summary:

1. GDP is a measure of a nationís economic health while GDP per capita takes into account the reflection of such economic health into an individual citizenís perspective.
2. GDP measures the nationís wealth while GDP per capita roughly determines the standard of living in a particular country.
3. GDP normally increase as the population increase while GDP per capita may decrease when population increases.

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