Question

Study the data in the table below and answer questions. The two regions are the two provinces of a small country

(a) What is the national Income for 1999?

(b) What is the real capita income for 1999?

(c) Which region indicates the biggest economic growth for the last three years? Motivate your answer

	Region A		Region B
	1995	1999	1995	1999
Population (millions)	4	5	5	7
Per Capita income	R200	R240	R150	R190
Price Index	100	125	100	115

Answer 1

(a)

National income (NI) = Per capita income (PCI) x Population

Region A (Million R) = 240 x 5 = 1200

Region B (Million R) = 190 x 7 = 1330

Total (Million R) = 1200 + 1330 = 2530

(b)

Real PCI = (PCI / Price index) x 100

Region A (R) = (240/125) x 100 = 192

Region B (R) = (190/115) x 100 = 165.22

(c)

NI, Region A, 1995 (Million R) = 200 x 4 = 800

NI, Region B, 1995 (Million R) = 150 x 5 = 750

Economic growth is measured by change in Real NI.

Real NI = (NI / Price index) x 100

Real NI, Region A, 1995 (Million R) = (800/100) x 100 = 800

Real NI, Region A, 1999 (Million R) = (1200/125) x 100 = 960

Economic growth, Region A = (960/800) - 1 = 1.2 - 1 = 0.2 = 20%

Real NI, Region B, 1995 (Million R) = (750/100) x 100 = 750

Real NI, Region B, 1999 (Million R) = (1330/115) x 100 = 1156.52

Economic growth, Region B = (1156.52/750) - 1 = 1.5420 - 1 = 0.542 = 54.2%

So, Region B has higher growth rate.