GDP Per Capita Formula

The GDP per capita formula calculates the average of the nation’s economic output when divided by the total population. In other words, it is the equal apportioning of the gross domestic product for each resident to represent the country’s standard of living.

Thus, it shows the breakdown of the economic output of a country for each individual. It helps the economist and the analysts to understand the country’s prosperity level and how well it is growing compared to other nations. If the nation is advancing towards rapid industrial development, then the formula of GDP per capita of that nation tends to be better than others.

The formula used to calculate the GDP per capital of an economy exibits the the output generated by every individual and proves to be a very useful metric for analysts and economists to evaluate the nation’s overall financial prosperity. It helps in comparing the growth and development capability among countries and in the process identify areas that need support and innovation.

The formula for GDP per capita provides an insight into the economic trend and possibility of future potential to grow. It is a universal method that is widely used by every country because the components used in it are globally tracked and monitored. This makes the entire process of calculating it very easy.

It clearly identifies the standard of living of citizens, but it is important to note that it does not necessarily show the income distribution in the economy. So it is obvious that differences in income level will continue to exist, and certain parts of the population may have a significant difference in income levels.

The formula for calculating GDP per capita is represented as follows:

GDP Per Capita = GDP of the Country / Population of that Country

• GDP per capita can measure a nation's economic output, accounting for its population and the person's count.
• The formula divides the nation's Gross Domestic Product, the GDP, the number of people, and the nation's total population. That would make a better measurement of a nation's standard of living.
• Further, if one is looking at just one point in time, then Nominal GDP can be used. And, if one compares the timeline, then Real GDP would make better sense.

The formula for GDP per capita can be expressed in terms of the currency of the specific country for which it is being calculated, like the dollar or euro, and is a widely used method for calculating the well-being of the citizens. If the resultant value is high, it signifies a good and prosperous economy.

Let us understand the concept real GDP per capita formula with the help of some suitable examples.

Example #1

Country X is a growing small economy. Last year the country reported its GDP as around $400 million, and the country's population, as per the previous census report, is 200,000. Therefore, you must calculate GDP per capita or country X.

Solution

Use the below-given data for the calculation of GDP per capita.

• GDP of country X: 400,000,000
• The population of country X: 200,000

 Calculation of GDP per capita can be done as follows:

= $400,000,000 / 200,000

GDP per capita will be -

• GDP per capita = $2,000

Therefore, the GDP per capita of country X is $2,000.

Example #2

Country MCX is trying to figure out the country's GDP and then wants to know the GDP and per capita of the country. The statistics department of the government has provided them with the below data:

Use the below-given data for the calculation of GDP per capita.

The nation's elections are due next year. The President is concerned if they made growth in GDP per capita. As per the last census conducted, the country's population is 3,237,450,050. It is estimated that the population since the previous census has grown by 3% and 5% in 2017 and 2018, respectively.

Based on available information, you must estimate the GDP per capita.

Solution

The GDP figure is not mentioned directly here. Therefore, we shall calculate the country's GDP by using the expenditure method in which all the investment is added, and only imports are deducted.

The GDP of the country in 2017 is as follows:

• = (130000000+465500000+6650000000)+3325000000-997500000
• The GDP of the country =10773000000.

The GDP of the country in 2018 is as follows:

• = (1945790000+742938000+9021390000)+4554917500-1180740750
• The GDP of the country = 15084294750.

Further, there has also been growth in the population of the country.

Based on the last census count, the population has grown by 3% and 5% in 2017 and 2018.

The population of the country in 2017 is as follows:

• =3237450050*3%
• The population of the country in 2017 = 97123501.50.

The population of the country in 2018 is as follows -

• =3237450050*5%
• The population of the country in 2018 = 161872502.50.

Therefore, the calculation of real GDP per capita formula for 2017 is as follows:

=10773000000/97123501.50

GDP per capita will be -

• GDP per capita = 110.92.

Therefore, the calculation of GDP per capita for 2018 is as follows:

=15084294750/161872502.50

GDP per capita will be -

• GDP per capita = 93.19.

Therefore, the GDP per capita of the country MCX has diminished since 2017.

Example #3

As per the data available on worldpopulationview.com, the GDP and the population of the various countries are available below:

Use the below-given data for the calculation of GDP per capita formula economics.

You must calculate the GDP per capita and comment upon the same.

Solution

Therefore, the calculation of GDP per capita is as follows:

= 21410230000000/329064917

GDP per capita will be -

• GDP per capita = 65063.85.

Similarly, we can calculate GDP per capita for other countries as shown below:

We can observe that the population of India and China is more. Hence, their GDP per capita depicts a low figure. Further, the GDP of India is more than the United Kingdom. But again, due to its oversize population, it is showing that India is way behind the UK, which does not appear when only GDP is compared. The USA is doing well in absolute GDP and per capita as well. Japan has the advantage of a lower population. Hence, its per capita is good.

The above examples clearly explain the concept GDP per capita formula economics. We look at some hypothetical cases where we learn how to use the available data and put thm in the formula to calculate the required metric. We also use some real world cases where we select some prominent countries of the world and compare them to understand which country stands at what position in terms of GDP per capital.

It is essential to note that this formula does not take into account some valuable aspect of the economy like income disparity or access to education, healthcare and some other areas that need continuous development by the government of the country so that the entire nation gets a boost towards better tomorrow.