What is per capita?
The meaning of the Latin word per capita is “by head.” In statistical observance terminology, it means “per person.” However, when used in daily life, per capita refers to the average per person. Most commonly, this term is used to refer to the per-person income of a country, especially during economic discussions.
What is the meaning of per capita?
The term “per capita” is commonly used in statistics and economics. This term explains how certain metrics work for a population. Some of the terms where it is frequently used are:
- GDP per capita (GDP stands for the Gross Domestic Product of a country)
- GNP per capita (GNP stands for the Gross National Product of a country)
These are used concerning the economic indicators of a country. They give economists and analysts more intricate information about the economy and the average income of people in a country. With these concepts, you can get a better picture and compare the economic conditions of people from countries across the world.
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Per capita: Explaining with examples
If you want to know what is per capita, you can understand it better by comparing the per capita income of different countries.
For ease of understanding, let us consider the leading economies of the world, which are the United States of America and China. While the USA is the largest economy, China is the second largest (in terms of nominal GDP).
According to the latest information available from the U.S. Bureau of Economic Analysis, the nominal GDP of the US in 2021 was US$ 23 trillion. According to data available from the National Institute of Corrections, the population of the country in 2021 was 338,289,857. The GDP per capita is calculated as GDP divided by the total population. Therefore, the GDP per capita of the USA was US$ 67,989 in 2021.
Now, let us calculate the GDP per capita of the second-largest economy in the world, China. In 2021, the nominal GDP of China was US$ 17.7 trillion (or $17,734 billion). According to official UN estimates, China’s population was 1.43 billion in 2021. When we divide the nominal GDP of China by its total population, we get the GDP per capita. Therefore, the GDP per capita of China was US$ 12,378 in 2021.
When we compare the GDP per capita of the USA with China, we observe a huge difference. The main reason is that China has a huge population that is larger than that of the USA. When we rank the countries as per their GDP per capita (as per World Bank Data), the ranks of the USA and China are 7 and 71, respectively.
What is the difference between per capita and median?
Per capita concept
Let us try to explain the concept of per capita with some context, especially with regards to the economic condition of a country. The question you may ask now is, what do you mean by per capita income?
To get the per capita income of a country, you must divide the national income (of all the people) by the country’s population. It will give you the per-head income or the average income of the country. Per capita income gives you a more average income estimation of a country’s population.
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Median concept
Median income of a country helps you get a more accurate picture of the people’s income. The median value becomes especially important when the sample is highly diversified.
In a country, the population includes infants, teenagers, adults, elderly people, and others. The per capita income will include non-income groups, such as infants and retired elders, while estimating a country's average or per capita income.
The median income estimation will always consider the number that comes in the middle of a sequence of numbers. The sequence is done either from the smallest to the largest or the largest to the smallest. Therefore, the non-income groups are eliminated from the median income estimation process, giving you a better estimation of the economic conditions of a country than per capita.
Median income refers to the level of income that comes at the exact middle in a list of incomes. When you consider the median income of a country, it means half of the populace has income higher than the median number and half of the other populace has income lower than the same.
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Final words
If your question is “what is per capita”, it can be explained as a per-person estimation rather than a gross estimate. Per capita can help you find a country’s average living standard or average prosperity per person. It is a reliable economic indicator, especially when you want to compare the standard of living of two or more countries. In contrast to absolute figures of nominal GDP, GDP per capita gives you a better comparison of a country’s average prosperity level.
However, prosperity may not adequately encapsulate the country’s quality of life. In that case, the Human Development Index (HDI) can be a more reliable indicator than GDP per capita, as the former considers many other factors such as life expectancy at the time of birth, climate condition, environmental quality, freedom of speech, political stability, access to education, and many other aspects along with economic prosperity.
