explain any three limitation of per capita income
Answers
(i) A rise in per capita income is due to rise in prices and not due to increase in physical output, it is not a reliable index of economic development.
(ii) National income rises but its distribution makes the rich richer and the poor poorer.
(iii) It excludes all non-marketed goods and services, even though they may be important for human happiness and better quality of life.
(iv) Rise in per capita income may be due to use of modern capital intensive technology in production which may be labour displacing in nature thus adversely affecting the poor masses.
I give you 4 limitations
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The limitation of this criterion are:
Per capita income is useful for comparison but it doesn't show the distribution of income.
It also ignores other factors such as infant mortality rate, literacy level, healthcare, etc.
Per capita income does not give the true picture as there is a huge population which does not earn at all like children and the senior citizens but they are also included while calculating per capita income. National income rises but its distribution make the rich richer and the poor poorer.