Total and per capita
So far we have been talking about national income as the total amount of income earned by the economy and this is an important measure. However, if we want to compare national income between countries, we need to adjust the measure.
For example, we would expect the USA to have a higher national
income than France, for example, as they have approximately five times
the population and more people means the USA should be able to produce
more goods and servies.
However, what is more important is whether, on average, each
person in the USA produces more in value than each person in France (or
To calculate this figure, we divide the national income by the population to get 'national income per person' or 'per capita'.
Using this measure we are in a better position to compare standards of living between countries. However, when using national income per capita to make international comparisons of welfare, there are still a number of additional factors that could be taken into account.