What is an important limitation of per capita GDP?
Answer and explanation
Correct answer: It does not show how income is distributed
Per capita GDP is calculated by dividing total GDP by the population, so it represents an average amount per person. However, an average does not reveal how income or output is distributed among people. A country may have high per capita GDP while a large share of its population remains poor and a small group receives most of the income. Inequality must therefore be examined separately.
Frequently asked questions
What is the correct answer to this question?
It does not show how income is distributed
Why is this the correct answer?
Per capita GDP is calculated by dividing total GDP by the population, so it represents an average amount per person. However, an average does not reveal how income or output is distributed among people. A country may have high per capita GDP while a large share of its population remains poor and a small group receives most of the income. Inequality must therefore be examined separately.
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.
