Question

What can be inferred about the limitations of using per capita income (average income) to compare well-being across countries? Choose the correct option as the answer.

Options

• It shows how equally or unequally income is distributed among the people in a country.

• The only measure needed to understand a country’s development is per capita income.

• It gives a basic idea of economic well-being but hides the income inequality.

• It only reflects the industrial growth of a country and does not consider other important factors.

Answer 1

It gives a basic idea of economic well-being but hides the income inequality.

Explanation:

Per capita income (average income) helps to compare the economic well-being of different countries, but it has limitations:

1. It only shows the average income, not how that income is distributed among people.
2. It does not reveal whether the rich are very rich and the poor are very poor.
3. It ignores non-economic factors like education, health, and living conditions, which are also important for well-being.