Question

How is GDP per capita calculated differently from labor productivity?

Short answer

GDP per capita and labor productivity are calculated differently, as GDP per capita is obtained by dividing a country's GDP by its population and represents the average income per person, whereas labor productivity measures economic efficiency by dividing the GDP by either the number of workers or the total hours worked. The former focuses on national welfare and standard of living, while the latter emphasizes economic efficiency and competitiveness.

Step-by-step solution

Define GDP per capita

GDP (Gross Domestic Product) per capita is a measure of the average economic output per person in a country. It is calculated by dividing the GDP by the population of the country. The formula for GDP per capita is: GDP per capita = \(\frac{GDP}{Population}\)

Define labor productivity

Labor productivity measures the output produced per worker or per hour worked within a country. It shows how efficiently labor input is being used within the economy to produce goods and services. Labor productivity can be calculated as output per worker or output per hour worked. The formulas for labor productivity are: Output per worker = \(\frac{GDP}{Number\:of\:workers}\) or Output per hour worked = \(\frac{GDP}{Total\:hours\:worked}\)

Comparison of the calculations

Comparing the calculations of GDP per capita and labor productivity, we can see that they differ in the following ways: 1. The denominator: GDP per capita is calculated using the total population, while labor productivity is calculated using either the total number of workers or the total hours worked in the country. 2. The focus: While GDP per capita represents the average income per person, labor productivity focuses on how efficiently the labor input is being used in the economy. 3. National welfare vs economic efficiency: GDP per capita is often used as an indicator of the national welfare or standard of living, while labor productivity is a measure of economic efficiency and competitiveness. In conclusion, GDP per capita and labor productivity are different economic measures that serve different purposes. While GDP per capita gives an idea of the average income per person in a country, labor productivity measures how efficiently the labor input is used in the economy to produce output. The calculations for these measures differ, as GDP per capita is calculated by dividing GDP by the total population, while labor productivity is divided either by the number of workers or the total hours worked in the country.