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In a country average income per capita rises but the proportion of people below the poverty line also rises. What does this demonstrate?

Answer and explanation

Correct answer: Average income can hide distributional changes

The governing concept is that an average is not the same as an equitable distribution. Per-capita income can rise if gains go mainly to richer households, while the incomes of poorer households stagnate or decline relative to the poverty line. Therefore, welfare analysis must examine both average income and distribution. Option A is correct; B denies the relevance of poverty, C is false, and D does not logically follow.

Related tags

Poverty-RatioIncome-DistributionAverage-IncomeGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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