Total output can rise while output per person falls.
Per capita means per person. Real GDP or real GNI per capita is more informative about average material resources than the total alone because it accounts for population size. It remains an average, not the income received by a typical household. Population growth greater than real output growth reduces real output per person.
- Per person
- Per capita means per person: total output or income divided by the population. Real GDP or GNI per capita describes average material resources after allowing for prices and population size.
- Watch for this
- When population grows faster than real output, output per person falls. The average does not show how much any particular household receives.
Worked example: More output, spread across more people
Supplied indices rise from 100 to 110 for real GDP and from 100 to 120 for population. The reported real GDP per-capita index is 91.7.
- Total real output increased by 10%.
- Population increased faster, by 20%.
- The supplied per-person index is 91.7 rather than 100, a fall of about 8.3% (100 - 91.7). More total output has not kept up with the larger population.
Watch out for this
A 10% increase in real GDP means each person is 10% better off.
Check population first, then distribution and wider wellbeing. An average does not allocate an equal share to everyone.
Check your understanding
Real GDP increases while real GDP per capita falls. Which explanation fits?
- Population grew faster than real GDP.
- Population must have fallen.
- Every household's real income must have fallen.