A per-person measure divides a total by the number of people. For output, it is real GDP per person (also called real GDP per capita). Questions on growth and living standards use it to check whether a rise in total output reaches the average person.
This lesson builds on nominal and real measures and belongs to the module on output growth and living standards.
Why not just use total GDP?
Total GDP depends on how many people live in a country. A fictional country with 50 million people will usually produce more in total than one with 3 million, even if the smaller country is far more productive per person.
Dividing by population puts both on the same footing. It is an average, so it is a starting point for comparison and not the final answer.
How do I calculate real GDP per person and its growth?
- Use real GDP if the years differ, so that prices do not distort the comparison.
- Divide by the population in the same year. Check the units: millions divided by millions gives a plain number.
- Repeat for the second year.
- Find the percentage change in the per-person figure: (new − old) ÷ old × 100.
The percentage-base explorer is a quick way to confirm that the old value is the base for step 4.
Worked example
The fictional country of Tolvane (all values real, in Tv$ million at Year 1 prices):
| Year | Real GDP | Population |
|---|---|---|
| Year 1 | 2,400 | 3.00 million |
| Year 2 | 2,520 | 3.15 million |
Step 1, GDP growth: (2,520 − 2,400) ÷ 2,400 × 100 = 120 ÷ 2,400 × 100 = 5.0%.
Step 2, population growth: (3.15 − 3.00) ÷ 3.00 × 100 = 0.15 ÷ 3.00 × 100 = 5.0%.
Step 3, per person, Year 1: 2,400 ÷ 3.00 = 800.
Step 4, per person, Year 2: 2,520 ÷ 3.15 = 800.
Step 5, growth in real GDP per person: (800 − 800) ÷ 800 × 100 = 0%.
The economy grew by 5.0%, but the average person had no more output than before. The population grew at the same rate, so the gain was shared among more people.
The mistake to watch for
A common slip is to treat total growth as a sign that everyone is better off.
Mistaken answer: “Tolvane’s real GDP grew by 5%, so living standards rose by 5%.”
The student left out the population change and so never calculated the per-person figure.
The correction is to calculate real GDP per person for both years before drawing any conclusion about living standards. A useful rule of thumb: if real GDP grows faster than population, the per-person figure rises. If it grows slower, the per-person figure falls.
Be careful with a second slip. Do not divide nominal GDP by population in one year and real GDP by population in another. Keep the measure the same in both years.
Check yourself
Try these, then open each answer.
1. A fictional country has real GDP of 9,000 million and a population of 4.5 million. Calculate real GDP per person.
Show answer
9,000 ÷ 4.5 = 2,000 per person.
2. Real GDP rises from 1,000 million to 1,040 million. Population rises from 200,000 to 202,000. Calculate the percentage change in real GDP per person.
Show answer
Year 1: 1,000 million ÷ 200,000 = 5,000. Year 2: 1,040 million ÷ 202,000 = 5,148.5 (1 d.p.). Change = (5,148.5 − 5,000) ÷ 5,000 × 100 = 3.0% (to 1 d.p.).
3. A country’s real GDP per person is 2,000 and its population is 3 million. What is total real GDP?
Show answer
Total = 2,000 × 3 million = 6,000 million.
Where this leads next
Once you can calculate the number, the next job is explaining why it rises. Move on to explaining a growth source with a causal chain. The ratios with interpretation limits tool shows how to say what a ratio does and does not tell you.
If the arithmetic is fine but the written explanation is where marks are lost, our teachers work on that gap in online one-to-one Economics tuition.