Measuring living standards
The starting point is to measure the total goods and services produced in a country
- It “adds up everything from nails to toothbrushes, tractors, shoes, haircuts,
management consultancy, street cleaning, yoga teaching, plates, bandages, books, and
the millions of other services and products in the economy”
→ Gross Domestic Product
Gross Domestic Product
Total Product
= Add up the value of (price∗quantity) for all final outputs
Gross Domestic Product (GDP)
= The market value of all final goods & services produced within a country in a given
period of time
Measuring the aggregate economy
Total Incomes
= Total Expenditures
= Value of total products
Reason?
For example, the total amount of money earned in 2020 is the money that was spent in
2020.
→ When you spend, you create income for somebody else
→ There should be a thing that you spend on
, How to measure living standards?
GDP/Population = GDP per capita
- Measure of average income and living standards
- Compare income across different countries
- Not a perfect measure of living standards.
- Difficulty in measuring underground and illegal activities
- Concept of “average living standards” does not capture income inequality.
Gross Domestic Product
Find GDP using 3 different approaches in measuring GDP.
Summary
Market value of total product
= Total Incomes
= Total Expenditures
(1) Total Product
=∑(Price∗Quantity) all final outputs
(2) Total Income
= Profits + Wages + (Tax-Subsidies) + Rents + Interest + others
The starting point is to measure the total goods and services produced in a country
- It “adds up everything from nails to toothbrushes, tractors, shoes, haircuts,
management consultancy, street cleaning, yoga teaching, plates, bandages, books, and
the millions of other services and products in the economy”
→ Gross Domestic Product
Gross Domestic Product
Total Product
= Add up the value of (price∗quantity) for all final outputs
Gross Domestic Product (GDP)
= The market value of all final goods & services produced within a country in a given
period of time
Measuring the aggregate economy
Total Incomes
= Total Expenditures
= Value of total products
Reason?
For example, the total amount of money earned in 2020 is the money that was spent in
2020.
→ When you spend, you create income for somebody else
→ There should be a thing that you spend on
, How to measure living standards?
GDP/Population = GDP per capita
- Measure of average income and living standards
- Compare income across different countries
- Not a perfect measure of living standards.
- Difficulty in measuring underground and illegal activities
- Concept of “average living standards” does not capture income inequality.
Gross Domestic Product
Find GDP using 3 different approaches in measuring GDP.
Summary
Market value of total product
= Total Incomes
= Total Expenditures
(1) Total Product
=∑(Price∗Quantity) all final outputs
(2) Total Income
= Profits + Wages + (Tax-Subsidies) + Rents + Interest + others
