Question

What is the primary way in which economists measure standards of living?

Short answer

GDP per capita is a common measure of standard of living.

Step-by-step solution

Step 1. Introduction

The material well-being, the availbaility of goods and services, and income level to lead a comfortable life for an average person in a country or region is referred to as standard of living.

Step 2. Explanation

The GDP of a nation shows the total value of goods and services produced in a nation. But it does not indicate the living standard of individuals. GDP per capita is used to compare living standards. The GDP per capita is computed by the ratio of the gross domestic product or GDP and the total population. It shows the average income of a person in the country.

The value obtained is not an accurate representation but an indicator of the living standard in the country. Though this method has been criticized as an inaccurate representation of living standards because it only takes into account economic growth while ignoring other things that may affect living standards such as crime and pollution.