What Does Per Capita Mean
This term has been derived from a Latin word which means head. Hence per capita is referred to as individual person. It refers to a set of people and also some kind of income they earn or spend. Such kind of income is called per capita income. It is generally that figure that is derived by taking the total spending and dividing the same by the number of population figures. This gives rise to a mean or average figure of per capita earned.
Per capita income is a very useful tool of economic indicator. This tool is used to measure the wealth of the population for a given country. The calculation of per capita would be a little difficult, because not all citizens of a nation would be working. There a people who would have retired, there are kids etc. In such cases an accurate per capita income can be calculated by excluding these people.
Any kind of average is required in getting an idea about the earnings or spending of a particular group. It is very vital to know that the per capita income represents the national average. Income is not the same in all regions, it varies geographically. Since there are difficulties in predicting per capita income it is generally used in comparison of standard of living of countries. Per capita income varies from nation to nation, the main reason for this the standard of living.
If a school for example decides to publish its financial report on how much it has spent per head, here the group becomes the number of students. Hence total expenditure would be divided by the number of students who actually attended the school. Here the per capita earning for a complete year may not depict the true figures. Hence a method to measure variations need to be discovered for calculating such things.
Per capital have many weaknesses; since it is a wealth indicator of a nation it should overcome the following disadvantages:
- As it does not count for people that do not result in monitory value, the result of this will be very critical for developing countries.
- The allotment of income among the population is not measured accurately; this can have an inconsistent effect on the entire nation.
- Since the exchange rates vary between countries, the per capita calculation of such people who are working of other nations cannot be calculated properly.
As per capita income is a very important tool in measuring the wealth of the nation there must be some measures in overcoming the above disadvantages. Especially for developing countries like India it is very important to know the per capita income of its population so that unemployment can be tamed down.