What is a possible limitation of per capita income as an indicator of economic welfare?
Answer and explanation
Correct answer: It does not fully show the distribution of income
Per capita income is calculated by dividing national income by the population, so it represents an average income. An average can conceal substantial inequality: two countries may have the same per capita income even though income is evenly distributed in one and concentrated among a small group in the other. Therefore, option A is correct.
Frequently asked questions
What is the correct answer to this question?
It does not fully show the distribution of income
Why is this the correct answer?
Per capita income is calculated by dividing national income by the population, so it represents an average income. An average can conceal substantial inequality: two countries may have the same per capita income even though income is evenly distributed in one and concentrated among a small group in the other. Therefore, option A is correct.
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.
