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what are the problems of trying to compare living standards

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Introduction

a) What are the problems in trying to compare the living standards between countries When comparing living standards between or within countries, many problems can occur while considering factors that are constantly changing in the countries which may determine the living standards of the country. Factors that may effect a countrys living standards for example GDP this comes from the output of different industrial sectors: the primary, secondary and the tertiary. This can be treated as aggreated supply. GDP can then be divided by the countries population to produce GDP per capita which gives an average income value, but this statistic can be very misleading and can disguse important differences e.g resulting in hidden economy. We assume that a higher GDP per capita shows that living standards are better in one country than another. But this is where the problems arise, two countries can have similar GDP's per capita, but one might have a small elite of very high-income earners, with a huge amount of people in dire poverty, while the other country may have fewer extremes and a very large proportion of middle-income families. So the Economic deprivation in large sections of the community can be hidden in the average creating a hidden economy. ...read more.

Middle

So there is more output per worker, making it positive economically. This makes it difficult to compare because maximum and minimum working hours vary in different countries. The level of public provision of goods and services - Using any economic data, such as GDP per capita over time, we must recognise that output and incomes measures can increase for many reasons other than the country producing more goods, because this is necessary if poverty is to be avoided or peoples living standards to be raised. Output and incomes measures may increase because of the rate of inflation which has merely increased the money value of goods and services produced rather than their real value. And also different countries consume different goods and services that best fit them therefore making it difficult to compare as one country may devote huge amounts on military expenditure, while another might have a larger proportion of GDP dedicated to household consumption. The levels of negative externalities such as road congestion, pollution. Quality of life over time can vary within a country making it even more difficult to compare with past situations as over time the products used differ along with quality as technology advances over time they improve making it hader to compare within the country over a certain time period because of new technology that did not exisit before. ...read more.

Conclusion

Economic inequality has existed in a wide range of societies and historical periods; its nature, cause and importance are open to broad debate. A country's economic structure or system (for example, capitalism or socialism), ongoing or past wars, and differences in individuals' abilities to create wealth are all involved in the creation of economic inequality. There are various Numerical indexes for measuring economic inequality. Inequality is most often measured using the Gini coefficient, but there are also many other methods. Economic inequality among different individuals or social groups is best measured within a single country. This is because country-specific factors tend to obscure inter-country comparisons of individuals' incomes. A single nation will have more or less inequality depending on the social and economic structure of that country. Qualitative Factors Considerations in decision making, in addition to the quantitative or financial factors highlighted by Incremental Analysis. They are the factors relevant to a decision that are difficult to measure in terms of money. Qualitative factors may include: (1) effect on employee morale, schedules and other internal elements; (2) relationships with and commitments to suppliers; (3) effect on present and future customers; and (4) long-term future effect on profitability. In some decision-making situations, qualitative aspects are more important than immediate financial benefit from a decision. ...read more.

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