Question

6.
Why
do
we
use
averages
?
Are
there
any
limitations
to
their
use
?
Illustrate
with
your own examples related to development.
​

Answer 1

Averages have many limitations. (a) They don't give us the true picture regarding the distribution of income. (b) Averages don't give us any information regarding the non-materialistic goods and services. While averages are useful for comparison, they also hide disparities.

Answer 2

We use averages because they are useful for comparing differing quantities of the same category.

For example, to compute the per capita income of a country, averages have to be used because there are differences in the incomes of diverse people. However, there are limitations to the use of averages. This does not show the distribution of thing between people. For an example, suppose in a country, the annual income of a rickshaw puller is Rs 8,000 while an MNC employee earns an annual package of Rs 12,00,000. The average income of this country, therefore, will be Rs 6,05,000. Here actual income or status remains unknown. One can clearly consider this as a rich country thereby ignoring the income disparity between two individuals. Averages are useful for comparison, they also hide disparities.