What is the meaning of Per Capita Income ?

Question

Accepted Answer

Per Capita Income is a measure used to evaluate the average income earned per person in a specific area, such as a country or region, over a certain period. It is an important indicator of the economic well-being of a population. The correct formula for calculating Per Capita Income is the Net National Product (NNP) divided by the population, which corresponds to Option 2: NNP ÷ Population.

### Explanation for Option 2:

1. **Definition and Calculation**: Per Capita Income is calculated by dividing the Net National Product (NNP) by the total population. This formula provides the average income per person, reflecting the economic prosperity of individuals within the nation. By dividing the total national income (NNP) by the population, we obtain a per-person income figure, which is crucial for comparing economic performance across different regions or countries.

2. **Economic Significance**: This measure helps in understanding the standard of living and economic health of a country. A higher Per Capita Income indicates a higher standard of living and better economic conditions for the average individual.

### Explanation for Why Other Options are Incorrect:

1. **Option 1: NNP × Population**: This option suggests multiplying the NNP by the population, which would result in an incorrect and nonsensical figure. Multiplying these two values does not provide any meaningful economic indicator and does not relate to the concept of average income per person.

2. **Option 3: Population ÷ NNP**: This option reverses the correct formula, suggesting that the population should be divided by the NNP. This would yield a figure that does not represent any recognized economic measure and would not provide insight into individual income levels.

3. **Option 4: Total Capital ÷ NNP**: This option involves dividing total capital by the NNP, which is unrelated to the calculation of Per Capita Income. This formula would not provide any information about average income per person and does not align with the definition of Per Capita Income.

In conclusion, Option 2 is the correct choice because it accurately represents the formula for calculating Per Capita Income, providing a meaningful measure of the average income per person within a population.