What is GDP per capita and what is its limitation as a measure of standard of living?

• A. GDP per capita accounts for income inequality.
• B. GDP per capita does not account for income distribution, non-market activity, or quality of life.
• C. GDP per capita includes unpaid household work.
• D. GDP per capita reflects only non-market activities.

Answer: (B)

GDP per capita is the total value of goods and services produced in a country divided by its population, giving an average economic output per person. It’s often used as a rough gauge of living standards, but it has clear limits. It doesn’t show how evenly income is distributed—two countries can have similar GDP per person but very different levels of inequality. It also excludes non-market activities like unpaid household work, caregiving, and volunteer work, which are real contributions to well-being. In addition, it doesn’t capture quality-of-life factors such as health, education, environment, safety, or overall happiness, nor does it reflect whether growth is sustainable. That combination of omissions is why GDP per capita is a limited measure of standard of living.