RAS question
Per Capita Income is calculated by dividing National Income by:
Correct answer: (A) Total population.
Per capita income is calculated by dividing national income by the total population.
Explanation
Per capita income means income per head, so the denominator is the whole population, not a narrower economic group. eGyanKosh defines the formula as national income divided by population and uses it to judge whether people, on average, are getting more goods and services in a given year. That is why total population is the right option: per capita income is an average for individuals across the country. eGyanKosh also explains that national income can rise while per capita income falls if population grows faster than national income, which shows why population is central to the calculation.
Why the other options are wrong
- (B) The number of taxpayers would exclude non-taxpayers, while per capita income is calculated for the population as a whole.
- (C) Households are not the unit in this formula, because per capita income is an average per person, not per family.
- (D) The total workforce leaves out people who are not working, whereas per capita income divides national income by total population.
Concept
This tests the national income accounting concept of per capita income as a population-based average. It recurs in RAS because it is used to compare living standards and to interpret whether growth is reaching people on average.