Transcript GCSE Economics - Measuring Living Standards

Mehak Kampani, Sarah Shaikh, Natasha Benkhadra
There are a no. of way you can measure living
standards:
•GDP / GNP
•GDP per capita
•Household income
•Household wealth
•Educational attainment
•Health standards
•Happiness
•Empowerment
Real GDP
Is the most common measure of living standards
It is the national output divided by national income
This a rough guide but has GDP has many limitations in measuring living
standards
Advantages of real GDP:
Real GDP takes into account inflation – more accurate measure of
economic growth and living standards.
It is a good measure of economic growth
It is comparable to other countries.
Disadvantage of real GDPDifficult to compare living standards because exchange rates do not reflect
local purchasing power of a country
Real GDP may underestimate economic development
Doesn’t show extremities
Doesn’t take into account the population of the country. The real GDP will
not be spread out evenly as the population might be too high in comparison
to the figure obtained.
GDP per Capita
 Economists estimate the average standard of living in a particular year in a
particular country by taking the real GDP and dividing it by the population
this gives the average amount of income that each individual in the
population potentially has access to.
 In 2010, in UK, the purchasing power parity GDP was 2181.677 which is
predicted to increase to 2642.875 in 2015. In comparison to India, which
had a PPP of 4001.103 in 2010 , predicted to increase to 6384.601 in 2015.
 The increase is greater in India from 2010 to 2015 because they have
greater poverty at the moment, which makes them available to more
room for improvement in comparison to UK, which has a higher and
steadier rate of living standards at present.
Advantages:
 Much more accurate reflection of real economic growth
 Easy to compare between countries – reflects the distribution of income
per person
Disadvantages:
 GDP per Capita might ignore some population, which might be
unemployed or are hidden in minorities.
GNP – Gross National Product
GNP is the market value of all goods and services produced in one year by
labor and property supplied by residents of a country. Unlike GDP, it
defines production based on geographical location of production.
GNP = net property income + GDP
Disadvantages:
 When net property income is calculated from abroad, the exchange rates
might effect the total figure- effects the accuracy of results.
Advantages:
 Includes almost all factors of GDP plus the foreign investments therefore
making it more accurate.
Household Income
•Household income includes all the income of all residents over the age of 18 in
each household,
•Including not only all wages and salaries, but such items as unemployment
insurance, disability payments, child support payments, regular rental receipts,
as well as any personal business, investment, or other kinds of income received
routinely
•Household income is often the combination of two income earners pooling
the resources and should therefore not be confused with an individual's
earnings.
•It helps measure standard of living as generally the higher the household
income the better the standard of living as there is a larger amount of income
available to facilitate goods and services to enhance living standards
•Many households consist of a single person, average household income is
usually less than average family income, because a household consisting of a
single person is not included in the average family income calculation.
A comparison
between
household
income and
GDP per
capita for
developed
countries is
shown in this
chart.
This graph shows there is a slight/weak correlation between the between the GDP and
Median household income as they are in some cases quite similar such as Singapore and
Israel. However in countries such as Switzerland and New Zealand they are noticeably
different with the household income being much higher than the GDP per capita. On the
graph UK ‘s GDP per capita is also lower then its household wealth this is because there is
a greater average amount of money in each household compared to the average of what a
single individual is earning.
Household Wealth
Economists interpret and define wealth to be the value of all household resources, both
human and non-human, over which people have command.While only one part of
personal resources, capital is believed to have an uneven impact on living standards and
economic success.
The average household in Britain has seen its wealth jump more than £150,000 during
the last half century
In 1959, typical household wealth – including equity in property, savings, pensions and
shares – was the equivalent of £72,700 in today’s money. By last year, the figure had
risen to £237,000.
The biggest rise was seen in the 1980s when household wealth more than doubled, but
household wealth fell by 15 per cent between 2007 and 2008 and remained 8 per cent
below its 2007 high despite an improvement last year.
The increases in house prices and a large rise in the number of privately owned homes
have been some of the main factors pushing up households’ wealth which has lead to
higher living standards in the UK.
Educational attainment
Is a term commonly used by economists to refer to the highest degree of education an
individual has completed.
Education improves ones opportunities to gain access to further education while
improving ones critical and analytical thinking skills
This makes a person more employable for future jobs and ensures good employment for
a good high income.
With a higher income a person is automatically inclined to be able to purchase a greater
variety of goods and services which could include comprehensive health care, social
services, and insurance.
Therefore leading to a higher standard of living and better secure family lives (usually,
but not always)
As a result the level of education a person manages to achieve is generally connected to
there future standard of living, and affects there level of income.
Higher degree of education = Higher standard of living
This graph shows that the higher the degree of education received the higher the weekly
earnings which means more income and the lower the unemployment rate in that
sector. The fact that there is lower unemployment and higher salary with more
education exemplifies the fact it leads to higher standard of living. Therefore Education
can be used to measure standard of living .
Health standards
Health is the general condition of a person in all aspects.
As they say “He who has health, has hope. And he who has hope, has
everything.” -- > better health = better living standards
The better the health standards the more able a person is to carry out
work which in turn allows him/her to attain income
The larger amount of income increasing living standards, making health
a measure of living standards.
If a person is unwell his unable to attend work and attain an income
reducing spending power and in turn his standard of living.
However if to attain good health standards you must receive good
healthcare then this could have a negative affect on the standard of
living as you may need to pay a certain amount of ones income further
reducing ones spending power.
In the UK its around 2250 per capita spending with an average
life expectancy of about 77.5 this is relatively low compared to
other countries such as Sweden which is around 4000 per
capita spending with an average life expectancy of about 80
This graph shows
that the higher the
life expectancy the
more spending per
capita which
suggests that to live
longer you need to
spend more on
healthcare to
improve you health
and lengthen your
life this can then
have a negative
effect on the
standard of living by
reducing it as a
person will have less
income to spend on
other goods and
services or with
better health it can
enable them to do
more work and
attain more income
Happiness
This heading revolves around the idea of : “the happier one is, the
better their living standards”.
There are several factors which are affected by ones happiness levels:
• If a person is happy, he/she is more likely to work harder in their job,
to try to earn a higher income which would ensure a better standard of
living.
• And vice versa, if a person is depressed or unhappy, he/she is not
going to put enough effort into their job which means a lower income
--> lower standards of living.
• This might further affect one’s health and could cause several
psychological problems which again may lead to poor living conditions.
Gender Empowerment
The Gender Empowerment Measure (GEM) is a measure of
inequalities between men's and women's opportunities in a
country.
It combines inequalities in three areas: political participation and
decision making, economic participation and decision making,
and power over economic resources.
It affects the living standards of a country because if there is
more of one race, this could result in sexism due to different
moral beliefs or traditions which could further lead to inequality
between genders – lowering standard of living .
Gender Empowerment
This map shows how populations rate on the Gender Empowerment Measure. This
measure is an indicator of opportunities for women. By this measure no territory has as
good opportunities for women as there are for men. The territories where women have
the most opportunities are in Western Europe more liberal views . The fewest
opportunities for women are in the Middle Eastern territories of Yemen and Saudi
Arabia this could be due to religious and moral beliefs e.g. Islam. There was no data for
any territory in Central Africa.