Per capita income is the average amount of money that a particular group of people receives in one year. In Latin, "per capita" means "by heads," so per capita income is the same as income per person. This calculation gives economists a way of measuring the standard of living or relative prosperity of people in a specific area.

## The Basic Method of Calculation

Select and count the people of all ages in a particular group -- for example a nation, state or city. Add up the total income for the group for a specific year. Divide the total income by the number of people. The result is the per capital income.

Per capita income is the average amount of money that a particular group of people receives in one year. In Latin, "per capita" means "by heads," so per capita income is the same as income per person. This calculation gives economists a way of measuring the standard of living or relative prosperity of people in a specific area.

## A Sample Problem

For example, a small town with a population of only 20 people had a total income of $200,000 in 2010. Calculate the per capita income by dividing the total income by the population. When you divide $200,000 by 20, the result is $10,000 in per capita income -- or $10,000 in income for every man, woman and child.

Per capita income is the average amount of money that a particular group of people receives in one year. In Latin, "per capita" means "by heads," so per capita income is the same as income per person. This calculation gives economists a way of measuring the standard of living or relative prosperity of people in a specific area.

## The U.S. Census Bureau Method

The U.S. Census Bureau includes people of all ages in counting population for per capita income, but it excludes money received by children under 15 years of age. It also excludes some types of income, such as food stamps, tax refunds, housing subsidies, bank withdrawals, gifts and lump-sum payments, such as insurance settlements and inheritances.

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