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Chapter 18: Problem 12

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

Short Answer

Expert verified
The primary way economists measure standards of living is by using Gross Domestic Product (GDP) per capita, which is calculated as follows: \( GDP \ per \ capita = \frac{Gross \ Domestic \ Product}{Population} \). Although it has its limitations, GDP per capita remains the most widely used and accepted measure of a country's standard of living.

Step by step solution

01

Understanding Standard of Living

The standard of living is a measure of the material well-being of a population, often based on factors such as income, quality of life, access to resources, and economic opportunity. It is an essential concept in economics because it helps us understand the overall economic well-being of a country or region.
02

Gross Domestic Product (GDP) per capita

The primary way in which economists measure standards of living is by using Gross Domestic Product (GDP) per capita. GDP is a measure of the total value of all goods and services produced within a country in a given period, usually a year. By dividing GDP by the population of the country, we obtain the GDP per capita, which provides a more accurate representation of the economic well-being of individuals within the country. GDP per capita is calculated as follows: \( GDP \ per \ capita = \frac{Gross \ Domestic \ Product}{Population} \)
03

Comparing standards of living

GDP per capita is often used to compare the standards of living between different countries or regions. A higher GDP per capita generally indicates a higher standard of living. However, it is important to note that GDP per capita is only an average measure, and it does not capture the distribution of wealth within a country. Additionally, it does not consider factors such as quality of life, environmental conditions, and access to education and healthcare. Despite its limitations, GDP per capita remains the most widely used and accepted measure of a country's standard of living.

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