Question
While average income is useful for comparison, but it may hide disparities. Discuss.
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Answer
Per capita income or average income is certainly an important criterion for measuring the development of an economy and it is considered to be one of the most important attributes for comparing different countries but taking per capita income as the sole indicator for measuring the economic development has the following limitations :
a. It does not tell us anything about the distribution of income. A country with a low per capita income and an equitable distribution of income would be better than a country with a high per capita income and an unequal distribution of income.
b. It does not measure various facilities and services that influence quality of life such as health facilities, education facilities and equal treatment, freedom, security etc.
c. It is affected by the size of the population. Even with a high level of national income, the per capita income of a country can be low, if that country has a large population.
a. It does not tell us anything about the distribution of income. A country with a low per capita income and an equitable distribution of income would be better than a country with a high per capita income and an unequal distribution of income.
b. It does not measure various facilities and services that influence quality of life such as health facilities, education facilities and equal treatment, freedom, security etc.
c. It is affected by the size of the population. Even with a high level of national income, the per capita income of a country can be low, if that country has a large population.
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