Explain why GDP per capita (by itself) is NOT a good measure of living standards. What...

Explain why GDP per capita (by itself) is NOT a good measure of living standards. What are some other factors that are important for determining living standards, which are not included in GDP per capita? Explain why GDP per capita AND these other factors should all be considered when evaluating living standards.

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Expert Solution

Answer - GDP is the measure of the monetary value of the final goods and services produced in the domestic economy. Gdp per capita is the average income of every person in the economy. But this income is not the measure of welfare in the economy. The living standaed of the person depends a lot upon many other factors such as the life expectancy , quality of life he lives , the environment in which he lives , his level of happiness etc.

The person has to live with all these factors . His life expectancy will decide how many years will he live , if he is likely to live for short period of time , he will not be happy with it. The life may be full of stress. The environmental pollution may be high leading to lot of health problems. These will all lead to loss of income as money will be wasted on extra health expenditures. Hence , only the monetary income or per capita GDP is not the only measure of good standard of living. These factors should also be considered along with GDP per capita

Rahul Sunny answered 1 year ago

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