Average income is good but it hides disparities. Explain.
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Averages are used to compare different countries, states, or regions. Since countries have different populations, comparing total income will not tell us what an average person is likely to earn. 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.
Limitations of Average Income
While averages are useful for comparison, they also hide disparities.
For example let us consider two countries- A and B. For the sake of simplicity, we have assumed that they have only five citizens each. Based on the data given in the table, let us calculate the average income for both the countries.
(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.
Limitations of Average Income
While averages are useful for comparison, they also hide disparities.
For example let us consider two countries- A and B. For the sake of simplicity, we have assumed that they have only five citizens each. Based on the data given in the table, let us calculate the average income for both the countries.
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