Question

1. Explain the critism direct towards per capita GDP.

2. what other types of measurment have proposed as other alternatives or to supplement GDP. Discuss these alternatives measures of wellbeing explianing how they are thought to be choices.

Answer 1

1. Per capita GDP is not considered a proper measue of economic growth and because of the following reasons:

i. It fails to differentiate between the concepts of economic growth and development. Per capita GDP is just the measure of simple average of income per capita in the economy. However, the concept of development does not work this way. We cannot measure the well being of the individuals on the basis of some average number. It requires taking into consideration other measures like the availability of basic needs of life.

ii. There might be a significant underestimation of GDP in most cases because a significant amount of the transactions go unreported in the economy.

iii. It does not deal with the question of distribution.

2. Other measures to supplement GDP are:

i. Human Development Index

ii. Physical Quality of life Indicator

You can also include the details of these measures. These measures are a significant improvement over the concept of GDP and can be used to supplement it as these measures include those indicators which reflect the development of individuals in the economy such as literacy rate, infant mortality rate, etc.