Question

The meaning of per capita income is:

• A. Total population of the country ÷ Total income of the country
• B. Total population of the country ÷ Total wealth of the country
• C. Total population of the country × Total income of the country
• D. Total population of the country × Total wealth of the country

Hint:

Per capita means for each head, so a total is being shared out. That rules out multiplication, and income rather than wealth is what gets shared.

Answer 1

The Correct Option is A

Concept:

• Per capita income, also called average income, is the total income of a country divided by its total population.
• Two things decide the correct choice here: the quantity involved must be income and not wealth, and the operation must be division and not multiplication.

Step 1: Write the formula.
$$\text{Per capita income} = \frac{\text{Total income of the country}}{\text{Total population of the country}}$$
It is called average income because it tells us what each person would earn if the total income were shared equally.

Step 2: Apply the first test, income against wealth.
The definition uses total income, which is what is earned in a year. Wealth means the stock of assets already owned and is a different thing altogether.
Options (B) and (D) both use wealth, so both are rejected.

Step 3: Apply the second test, division against multiplication.
Per capita means per head, so a total has to be shared out among the people. That calls for division. Multiplying income by population would give a meaningless figure far larger than the income itself.
Option (C) uses multiplication and is rejected.

Step 4: Identify the intended choice.
Only option (A) combines income with division, so it is the intended answer. Note carefully that the correct working is total income divided by total population, and it is this quantity that the World Development Reports use to classify countries.

Step 5: Note how the measure is used.
Countries with a per capita income of US $\$$ 49,300 per annum and above in 2019 were called rich countries, and those with US $\$$ 2,500 or less were called low-income countries. India, with about US $\$$ 6,700 per annum, came in the middle group.

Final Answer: (A), since per capita income relates total income to total population by division.