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.
Frequently asked questions
What is the correct answer to this question?
Average income can hide distributional changes
Why is this the correct answer?
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.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
