Gross domestic product (GDP) is a monetary measure of the market value of all final goods and services manufactured in a time frame, often yearly or quarterly. Nominal GDP evaluations are commonly utilised to decide the economic performance of a whole country or a region and to make international comparisons.
GDP (nominal) per capita does not, however, contemplate differences in the cost of living and inflation rates of the nations. Hence, using a basis of GDP per capita at the purchasing power parity (PPP) is possibly more functional when contrasting differences in living standards between countries.
Also, check: Difference Between GDP and GNP
The definition of welfare in economics is an effort by Alfred Marshall, an explorer and a neoclassical economist, to reanalyse his field of study. This definition elucidates the stream of economic science to a larger study of humanity. Particularly, Marshall’s view is that the field of economics studies all the pursuits that people take in order to attain economic welfare.
In the words of Marshall, A man earns money to get material welfare.’ This definition expanded the scope of economic science by foregrounding the study of wealth and humanity simultaneously, rather than that of wealth alone.
If a person has more earnings, they can purchase more commodities and services, and their material well-being enhances. So, it may seem rational to treat their income degree as their degree of wellbeing. GDP is the total of the value of commodities and services created within the geographical frontier of a nation in a particular year.
It gets allocated among people as earnings (except for retained incomes). So, we may be persuaded to treat the higher degree of the GDP of a nation as a hint of a greater well-being of the people of that nation (to account for cost price changes, we may take the value of the real GDP instead of the nominal GDP).
The above-mentioned concept is explained in detail about GDP and welfare. Stay tuned to BYJU’S to know more.