The comparison of the standard of living between Nigeria and Ghana is best down through the use of

Analyze the question: You are asked which measure is best for comparing the standard of living between two countries, Nigeria and Ghana.

Explain the concept: Standard of living describes how well off the average person in a country is. Two countries differ greatly in population size. Nigeria has over 200 million people, while Ghana has about 33 million. So a total figure such as national income cannot be compared fairly, because a bigger country will usually have a bigger total even if its people are poorer.

Go through the options:

• A. Gross National Income: This is a total figure. It does not account for population size, so it is misleading for comparing living standards.
• B. Per capita income: This is national income divided by population, so it shows the average income per person. It makes countries of different sizes comparable, and that is why it is the standard indicator of living standards.
• C. Net National Income: This is GNI minus depreciation. It is still a total figure, so it has the same weakness as option A.
• D. Net disposable income: This is income left after taxes. It is a total figure that is more useful for analyzing household spending and saving than for comparing countries.

Solution: Per capita income = National Income ÷ Population

Because it gives the average income per person, it is the best basis for comparing the living standards of Nigeria and Ghana.

Answer: B. per capita income

Exam tip: Whenever you see "compare standard of living" between countries or over time, think per capita. Totals ignore population. Remember: "Per head, not the whole bed."