What is the relationship between a country’s capital‐labour ratio and its per capita GDP? Could you...
What is the relationship between a country’s capital‐labour ratio and its per capita GDP? Could you please give me some examples to explain that?
Homework Answers
The per capita GDP refers to a measure of a nation's economic output that accounts for its number of people. It is computed as nation's gross domestic product for a particular period divided by its total population. A higher capital-labour ratio is obtained with improvements in productivity from investment in capital and automating the process of production. The higher "productivity" will lead to higher income because high capital-labour ratio is likely to have higher real wages thus generating a rise in per capita GDP.
For example: The higher capital labour ratio increases per capita GDP because with enhancement in labor productivity there is more production of goods and services for the similar amount of relative work
|
Year-1 |
Year-2 |
Year-3 |
Year-4 |
|
|
Assets |
25,000 |
25,000 |
35,000 |
40,000 |
|
Labor |
30,000 |
25,000 |
20,000 |
16,000 |
|
Capital-Labor Ratio |
83% |
100% |
175% |
250% |
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