What is Per Capita Income? - Definition & Example

Lesson Transcript
Instructor: Brianna Whiting

Brianna has a masters of education in educational leadership, a DBA business management, and a BS in animal science.

Income per capita is the average earnings per person in a geographic region, such as a city, state, or country. Learn how to define income per capita, discover how it's calculated, review its accuracy, and then explore an example of how it works. Updated: 04/13/2022

Definition of Income Per Capita

Have you ever moved? Have you done any research about the area prior to the big move? While the population, the climate, and the list of things to do are often some of the most researched factors to consider, other factors that might also come to mind are jobs and income. Are there jobs available in the area you are moving, and if so, what can you expect to earn? Possibly the quickest way to answer these questions is to look at the income per capita for the area.

So you may be asking, what is meant by income per capita? Well, income per capita is basically the amount of money per person in a specific area. More specifically, according to the United States Census Bureau, it is the money earned by every man, woman, and child in the last 12 months for a specific geographic area. Often, the income per capita is calculated for cities and even countries so that we can see what it may be like to live in those areas. It helps us address issues like the quality of life and the living conditions we can expect for specific areas.

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  • 0:01 Definition of Income…
  • 1:03 Calculation of Income…
  • 2:27 Income Per Capita Accuracy
  • 3:17 Lesson Summary
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Calculation of Income Per Capita

Now that we know what income per capita is, let's look at how it is figured. First, a survey is taken in order to look at a specific period of time. The survey consists of individuals reporting their income from a variety of sources, such as salary, social security, dividends, welfare, disability and retirement, to name a few. The second step is to plug the information from the survey into the following math equation:

Total income of individuals 15 and older in a specific area/Total population in that specific area

Let's now look at an example utilizing this equation. Suppose we want to figure out what the income per capita is for the city of Walcott. We first need to figure out the incomes of everyone that lives in that town.

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