Career Development

Per Capita: Definition, Calculation and Usage

June 9, 2021

This article has been approved by an Indeed Career Coach

“Per capita” is a concept used in economics, business and statistics to measure by individuals in a population. This ratio can be used to compare and contextualize measurements per person, and can provide different information depending on how it's used.

In this article, we discuss what per capita is, how to calculate it and how it is most frequently used.

What is per capita?

Per capita is a Latin phrase meaning "by head." It's used to determine the average per person in a given measurement. For example, a common way in which per capita is used is to determine the gross domestic product (GDP) of a population per capita. This measurement provides a comparison of how much a company produces economically compared to how many people live in the country.

The context in which per capita is used will determine how it is interpreted and what it measures. This term is most frequently used in economic, business or statistical settings to produce a report of an average of something per person. It can also be used in wills to indicate that beneficiaries should receive equal shares of an inherited estate.

Related: Finance vs. Accounting: Definitions and Differences

How to calculate per capita

Calculating per capita entails taking into account a measurement or number amount by which you will then divide by the total population of the group wishing to be analyzed. The following formula can be used to determine the per capita:

Per capita = Unit / Number of people in a population

Take the following steps to calculate the per capita of a particular situation:

1. Determine the number that correlates with what you are trying to calculate

For example, if you want to know how many people have blue hair per every X amount of people in a certain population, you would first determine the total number of people with blue hair in that population.

2. Determine how many people are in the population that you want to measure

This number will be the total amount of individuals in the group you are measuring. For example, if you want to measure how many people have blue hair in your neighborhood, you would need to find out the total number of people who live in your neighborhood.

3. Divide the measurement by the total number of people in the population

So, if four people have blue hair in a neighborhood of 250 people, this would give you the following formula: 4/250 = 0.016.

4. For smaller measurements, multiply the total by 100,000

So, using the above example, you would take 0.016 and multiply it by 100,000. This would give you 1,600. As a result, you could say that 1,600 people have blue hair per every 100,000 people in your neighborhood.

Using the above example, the conclusion would be that there are 1,600 individuals with blue hair per 100,000 in the population that was measured.

Related: Jobs That Pay Well

How per capita is used

The following are the most common ways in which per capita is used:

  • Gross domestic product (GDP)
  • Per capita income

Related: Learn About Being a Financial Planner

GDP per capita

GDP per capita is a measurement used to determine a country's economic output about how many people live in the country. The GDP of a country is calculated by dividing a country's total domestic output by its population. The formula for GDP is as follows:

Gross domestic product/population = GDP per capita

The following is a fictional example of how to calculate the GDP per capita for a country:

The United States had $20 trillion in gross domestic product in 2015. Additionally, 300 million people were living in the country in 2015. Using the above formula, you would calculate 20 trillion/300 million = 66,666. This means that the GDP per capita, or person, in the United States in 2015 was $66,666, which equates to individuals making an average of $66,660 per person in 2015.

It's important to note that a high GDP does not always mean that the country has a high GDP per capita. For example, China often has a higher GDP than many other countries in the world. However, China also has the highest population in the world, meaning that the GDP per capita will be much less. The higher the population of a country, the lower it's GDP per capita will often be.

Gross national income per capita

You can also determine the gross national income per capita of a country using a similar formula to the one used to get the GDP per capita. To calculate the gross national income per capita, you will use the same information used to calculate the GDP per capita, in addition to any income that residents have brought in as a result of foreign investments. The gross national income per capita also takes into account income that has been earned from interest and dividends overseas.

According to the World Bank, gross national income per capita is the total amount of income earned by residents of a country as well as the companies in the country no matter where the person or business obtains the money or is located.

In the United States, the per capita income is surveyed once every 10 years and offers an updated estimate of the country's per capita once every September. The U.S. Census is responsible for providing these numbers and surveys and does so by taking into account the income of every U.S. resident over the age of 15 for each year. Using this information, the U.S. Census provides residents with an estimate of the average per capita income for each year.


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