Why can average per capita income be misleading when income distribution is highly unequal?
Answer and explanation
Correct answer: It may not represent the actual income of most people
Per capita income is an arithmetic average: total income divided by population. A very rich minority can receive a large share of income and raise this average, even when most households earn far less. The average therefore does not reveal the median person’s income or the distribution of resources. Option D is correct. A does not follow from the formula, B is plainly false, and C confuses income with a price measure.
Frequently asked questions
What is the correct answer to this question?
It may not represent the actual income of most people
Why is this the correct answer?
Per capita income is an arithmetic average: total income divided by population. A very rich minority can receive a large share of income and raise this average, even when most households earn far less. The average therefore does not reveal the median person’s income or the distribution of resources. Option D is correct. A does not follow from the formula, B is plainly false, and C confuses income with a price measure.
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.
