Economics · Economic development. The idea in plain words, the rules to remember, the mistake to avoid and a worked example, written and checked by Mega Lecture.
Living standards are how well off people in a country are. The simplest indicator is real GDP per head: real GDP divided by population. It is easy to calculate and compare, but it is only an average. It hides how income is shared, and it leaves out unpaid work, leisure, pollution and the quality of goods.
The Human Development Index (HDI) is wider. It combines health (life expectancy), education (years of schooling) and income (GNI per head) into a value between 0 and 1. It still leaves out inequality, freedom and the environment.
Living standards differ because of differences in productivity, education, healthcare, resources, jobs and government policy.
Students compare total real GDP instead of real GDP per head. A country with a large GDP and a very large population can have a low income per person.
Answer: Country Y, with $3,000 per head against $2,000 for Country X.
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