Question

How is GDP per capita calculated differently from labor productivity?

Short answer

GDP per capita and labor productivity are calculated differently based on the denominators used in their respective formulas. GDP per capita is calculated by dividing a country's GDP by its population, representing the average income per person, while labor productivity is determined by dividing the GDP by the total number of hours worked by the labor force, focusing on the efficiency and productivity of the workforce.

Step-by-step solution

1. Define GDP per capita

Gross Domestic Product (GDP) per capita is an economic measure that helps assess the standard of living and economic performance of a country. It is calculated by dividing a country's GDP by its population. The formula for GDP per capita is given by: \(GDP \ per \ capita = \frac{GDP}{Population}\).

2. Define labor productivity

Labor productivity is an economic indicator that measures the efficiency and productivity of the labor force, which is crucial for economic growth and improvements in living standards. It is calculated by dividing the total output of goods and services (GDP) by the total number of hours worked by the labor force. The formula for labor productivity is: \(Labor \ productivity = \frac{GDP}{Total \ hours \ worked}\).

3. Compare the calculation of GDP per capita and labor productivity

The main difference between the calculation of GDP per capita and labor productivity is the denominator used in their respective formulas. While GDP per capita uses the total population as the denominator, labor productivity employs the total number of hours worked by the labor force. GDP per capita is a measure of the average economic output per person, indicating the prosperity and standard of living of the country. In contrast, labor productivity focuses on the efficiency of the labor force, measuring how much output is produced per hour of labor. In summary, GDP per capita is a measure that represents the average income per person in a country, while labor productivity is an indicator of how efficient and productive the workforce is in the country.