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Summary IGCSE Economics Section Unit 5 Revision Notes

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IGCSE Economics Section Unit 5 Revision Notes. Living Standards Living standards or standards of living refer to all the factors that contribute to a person’s well-being and happiness Measuring Living Standards  GDP per head/capita: this measures the average income per person in an econom...

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  • January 5, 2023
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IGCSE Economics
Section Unit 5
Revision Notes

, Section/Unit Wise Revision

Unit/Section- 5 – Economic Development



Living Standards
Living standards or standards of living refer to all the factors that
contribute to a person’s well-being and happiness
Measuring Living Standards
 GDP per head/capita: this measures the average income per person
in an economy.
Real GDP per capita = Real GDP / Population
Merits of using GDP per capita to measure living standards:

 GDP is a useful measure of the total production taking place in the
country, and so indicates the material well-being of the economy
 it also takes population into consideration, adding emphasis on the
goods and services available to individuals
 since it is calculated on output, is a good indicator of the jobs being
created
 GDP data is readily available so is population data



Limitations of using GDP per capita to measure living standards:
 it takes no account of what people can buy using their
incomes. A country with a high GDP per head may be no better off
than a country with a low GDP per head, if there are far fewer products
to choose from
 similarly, GDP doesn’t consider changes in technology that can
have a large impact on living standards. People might have had
more income in the last decade but they couldn’t benefit from all the
technology available today
 distribution of income is very unequal in reality, so the GDP per
head isn’t accurate. Some people might be very rich while others very
poor, but the GDP per head will only give the average incomes
 real GDP excludes the unpaid work people do for charities and
voluntary organizations etc. Thus, it understates the total output
 GDP also doesn’t differentiate between the positive and
negative values economies place on different
output/expenditure. For example, if the output rises because the
sales of tobacco, alcohol or pornographic materials, it might show in
the records as a rise in GDP per head but might not actually make
people better off. Similarly, GDP might rise if the government has to

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