Economic development is more than income: health, education, choice and a fair share all count. That is why it is multidimensional.
Six kinds of single indicator
| Indicator | What it shows | One limit |
|---|---|---|
| GDP or GNI per capita at PPP | Average income, adjusted for prices | Says nothing about who gets it |
| Life expectancy, infant mortality | Health | Averages hide gaps between regions |
| Literacy, years of schooling | Education | Years in school are not skills learned |
| Gini coefficient | Income inequality | Not the level of income |
| Access to electricity | Energy | Not whether supply is reliable |
| CO₂ emissions per person | Environment | Ignores other pollution |
The points to remember
- A single indicator measures one dimension; it never tells the whole story.
- Use at least one income and one non-income indicator in an answer.
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Comparing incomes between countries needs one more step.
Why use purchasing power parity (PPP)?
The problem
$1,000 changed into local money buys far more food and rent in a poorer country.
The fix
PPP adjusts incomes for what money buys in each country.
The result
Comparisons of living standards between countries become fairer.
The points to remember
- Write it like this: "GDP per capita at PPP adjusts for price differences, so it compares living standards more fairly."
- GNI adds income earned abroad and subtracts income paid abroad.
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A Paper 3 question in this shape could appear for 4 marks.
Explain two limitations of using GDP per capita as a measure of economic development.
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Other limits you can use
The informal economy
Unrecorded work makes output look smaller.
The environment
Output that pollutes still adds to GDP.