Per Capita Income =

Question

Per Capita Income =

Accepted Answer

The correct option is 3:

Per Capita Income (PCI) is a fundamental measure used in economics to gauge the average economic output or income earned per person in a given region or country. It is calculated by dividing the total National Income (or sometimes GDP) of a country by its entire population size. This gives a better estimate of the standard of living and prosperity of the average citizen than simply looking at the aggregate National Income. It helps in comparing the economic welfare of countries with different population sizes.

The incorrect option is 1:
National income / working population. This ratio would calculate the average income generated per person who is actively working. This is often referred to as labor productivity or income per worker, not the standard measure of per capita income for the entire nation. Per Capita Income, by definition, includes the entire population, including those who are not working (like children, retirees, and the unemployed).

The incorrect option is 2:
National income / total number of workers. Similar to Option 1, dividing by the total number of workers measures the average income generated by the labor force. While this is an important economic metric, it excludes the non-working segment of the population and therefore cannot represent the per capita income of the nation as a whole.

The incorrect option is 4:
National income / work participation rate. Work participation rate is the ratio of the working population to the total population, expressed as a percentage. Using this rate as the denominator would lead to a calculation that does not yield a meaningful average income per person and is economically incorrect for calculating Per Capita Income.