Economics Assessment 1.docx - Question 1 Gross Domestic...

Question 1
Gross Domestic Product (GDP) is a conventional way of measuring economic wellbeing, which
indicates the market value of final goods and services produced by a country for a specific
period of time.
The main focus of GDP per capita is to measure the production capacity per person indicating
economic growth, higher welfare and lower unemployment. However it doesn’t take the people
development factors into consideration and can be criticized as an inefficient measure of
welfare. As a result, GDP per capita excludes many non-economic factors which are crucial for
measuring overall country’s wellbeing such as;
• Change in income distribution
• Quality of education
• Life expectancy at birth
• Quality of life
• Environment costs
• Leisure time
• Goods/services produced by the house-hold market
• Use of infrastructure
• Social costs (over-crowding)
Due to ignoring many non-economic factors, UN developed the Human Development Index
(HDI), an alternative method of measuring welfare that incorporated three key features - health,
education and standard of living. Hence, HDI can provide a more realistic picture of a nation’s
welfare than GDP. Most importantly, if both GDP per capita and HDI measures are combined, it
can help the economists to identify the main economic issues and the existing
economic/welfare policies can be amended accordingly.
HDI Dimensions (Source:UN)

The two graphs below are plotted based on historical GDP per capita and HDI for Australia and
United Arab Emirates from 1990 to 2019.
1990 1991992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002003 2004 2005 2006 2007 2008 2009 2010 2011 2012013 2014 2015 2016 2017 2018 2019
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
70,000
UAE and Australia GDP Per Capita - Historical Data
UAE GDP Per Capita (US $) Linear (UAE GDP Per Capita (US $))
Australia GDP Per Capita (US $)
GDP per capita US $
1990 1991992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002003 2004 2005 2006 2007 2008 2009 2010 2011 2012013 2014 2015 2016 2017 2018 2019
0.7
0.75
0.8
0.85
0.9
0.95
1
UAE and Australia - Human Development Index (HDI)
UAE Human Development Index (HDI) Linear (UAE Human Development Index (HDI))
Australia Human Development Index (HDI)
HDI
The GDP per capita for both developed countries are trending upwards. Overall Australia has
shown a higher economic growth than UAE though there has been few instances with negative
GDP growth for both countries since year 2000 trending in a similar pattern where the