Uses of per Capita Income
- Per capita income is a crucial tool in economics and statistical studies and a useful indicator of the living standards of people, which also influences business strategies and decisions. Some of the uses of per capita income are given as follows:
- Per capita income measures the amount of money earned per person in a nation or geographic region.
- Per capita income indicates the average income per person in a region, which helps to evaluate the standard of living of the population living in the region.
- Per capita is a general parameter to ascertain the possession of wealth or lack of wealth by the population in a region.
- Per capita income is useful in evaluating people’s affordability and purchasing power.
- Per capita income indicates whether certain commodities and facilities are out of reach by average people in terms of financial aspects.
- Businesses use per capita income information for deciding the marketing and sales strategies for potential customers depending on their income structure.
- Businesses and industries analyze the market demand for their products based on the per capita income of that region to increase sales and revenue.
- Prominent business chains and owners consider the per capita income as the chances of profitable revenue reduced with lower per capita income.
- The per capita income is a useful indicator to compare the economic situation of countries.
The Calculation of per Capita Income:
Per capita income is a measurement of the population’s average income per –person and is often used to compare countries’ economic situations with different population sizes. The interpretation of per capita income is essential in determining the standard of livelihood of the population, which is a crucial indicator of a country’s economic development.
Per capita income is calculated by using the following formula:
Per capita income = Total income of the population/population.
For example, if the total population of a geographical area is 5,000 people, and the total income earned by the population is Rs. 10, 00,000 then the per capita income of that region will be:
10,00,000 / 5,000 = Rs. 200
Per Capita Income: Uses And Limitations
Per capita income measures the amount of money earned by every person in a particular country, state, or city. It determines the average income of a person in that specific region. It indicates the standard of living and the quality of life of people in the geographical location under consideration. The per capita income of a country is calculated by dividing its national income by its population, including men, women, and children. Per capita income helps study statistics, economics, and many other fields.