GDP per capita is the gross domestic product (GDP) divided by the number of people in the country, offering a measure of average economic productivity and well-being per person. It is calculated either by converting GDP to the same units as the population and then dividing by the population or directly using the formula GDP per capita = GDP / population. When comparing different countries, GDP figures are exchanged into a common currency using exchange rates.
GDP per capita means that the GDP is calculated per person. It is a measure that takes the gross domestic product (GDP) and divides it by the number of people in the country. This metric is particularly useful for comparing the economic performance of different countries, as it reflects the relative economic productivity and well-being of their populations. When we say 'per capita,' it is a Latin term that translates to 'by heads' or 'for each head,' referring to per individual.
To calculate GDP per capita, you follow two primary steps:
- First, if necessary, convert the GDP to the same units as the population. For instance, if the GDP is in billions of dollars and the population is in millions, you would multiply the GDP by 1000 to get GDP in millions of dollars.
- Then, you divide the result by the population in millions.
The formula looks like this: GDP per capita = GDP / population
It's important to note that when comparing GDP per capita among countries, we need to ensure that the GDP is expressed in a common currency, often done by using exchange rates to convert different currencies.