5.2 Living standards Flashcards
GPD per capita formula
GPD/population
What does GDP per capita show
Shows average income which helps indicate living standards
What happens if population growth rate faster than gdp growth rate
GDP per capita falls W
Real gdp per capita formula
real gdp/population
Why is real gdp per capita taken
Measures the actual increase in goods and services in an economy exluding the impact of rising prices
Limitations of gdp per capita/real gdp per capita
it takes no account of what people can buy using their incomes
GDP doesn’t consider changes in technology that can have a large impact on living standards
distribution of income is very unequal in reality
excludes the unpaid work people do
also doesn’t differentiate between the positive and negative values economies place on different output/expenditure
Doesn’t taken into account the other factors that make people happy
What is the HDI
used by who
Human Development Index - used by the United Nations to compare living standards across the globe
HDI combines different measures into one to give a HDI value from 0 (lowest) to 1(highest).
What are the different indexes that get combined in hdi
explain them
Income index - measured using the average national income
GNI per head - adjusted for differences in exchange rate and prices in different countries (purchasing power parity)
Education index - measured by how many years on average, a person aged 25 will have spent on education (mean years of schooling) and how many years a young child entering school can now be expected to spend in education in his entire life (expected years of schooling)
Healthcare index: measured by average life expectancy at birth
What is GNI per capita
Gross national income per capita - dollar value of a country’s final income in a year divided by its population
Benefits of using HDI
it takes into account some major indicators
Recognizses output and social factors influence living standards
Compare living standards globally
Useful and reliable - produced by UN
Limitations of HDI
it combines a set of separate indicators into one - High literacy rates but poor life expectancy can lead to low HDI value
there are wide divergences in HDI within countries
GNI per head doesn’t say anything about inequalities in income and wealth within countries
Doesn’t consider other factors - evironmental quality, access to safe drinking water, political freedom, crime rates etc
HDI info for all countries isnt available
Some reasons for differences in living standards
Productivity of industries
Population
Ability of citizens pay taxes
Provision of health and educational facilities
Variety of goods/services produced
War, crime and natural disasters:
