Question

differentiate between national income and per capita income. Increase in real per capita income means increase in per capita availability of goods and services. Does it necessarily mean rise in the welfare of the people os the country? Give one argument in support of your answer and explain the same .

Answer 1

Dear Student,
National Income is the aggregate of factor incomes earned by all the factors of production (that are normal residents of a country) within the domestic territory and abroad. It is also known as Net National Product at Factor Cost (NNP FC ). While, ​Per capita Income is the average income earned per person in an economy during an accounting period. It is estimated by the following formula.
$Percapitaincome=\frac{NationalIncome}{TotalPopulation}$

As far as real per capita income is concerned, it is calculated using the given formula,
$Realpercapitaincome=\frac{Realincome}{TotalPopulation}$

An increase in real per capita income leads to an increase in the per capita availability of good and services in the economy. An increase in per capita availability of goods and services in turn leads to an increase in the standard of living of the people. Thus, we can say that a rise in real per capita income leads implies a rise in the welfare of the people in the country.