Hi friends, in today’s article we are going to know about the concept of Per capita Income (PCI) or per capita income meaning and limitations. So let’s discuss in details.
Table of Contents
What is the Meaning of Per Capita Income?
Per capita Income is an important method of measuring economic development. It refers to the real national income divided by the total population of the country. The formula of per capita income is given below –
As an alternative of national income method economist like Rostow, Baran, Leibenstein, Buchanan and lots of others favour the usage of per capita output as an index of financial or economic development.
The UNO experts in their report on ‘Measures of economic Development of under developed Countries’ have additionally accepted this measurement of development.
According to this approach if a country’s real per capita income is increasing over a long period of time, it is expected that the development is progressing well.
Merits of Per Capita Income
• Standard of living can be better estimated through per capita income rather than national income. If national income of a country is going up however the per capita income isn’t growing that will now no longer increase the living standard of the people. That way, per capita income is a higher degree of economic development than the national income.
• When per capita income increases the investment capacity or capital accumulation process also rises.
• Increased per capita income can be used to compare the growth rate of a country with other countries easily.
• Very simple method of measuring economic growth of the country.
Limitations of Per Capita Income
• If in a country an increase or growth in national income is offset by the increase in population, then we might be sure to mention that no economic development has taken place.
• When we divide national income with the aid of using population, the problem of population if so is ignored. It confines the scope of the study.
• In the underdeveloped countries with the increase in per capita income, there is also increase in unemployment, poverty and income inequalities. This cannot be regarded as development.
Conclusion
So friends, this was the concept of per capita income or per capita income meaning. Hope you get the full details about it and hope you like this article.
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