Why did average income may not show the real picture ?
Answers
People may be neither rich nor poor but in another country with the same average income one person may be extremely rich while others may be very poor. So the method of average income does not give the correct picture of a country. Hence this system hides disparities among people .
Answer:
Average income is calculated by dividing the total sum of income by the total population of the country. It is used to make a comparative analysis of the position of the country since the total income can never be an indicator of the economic health of the country and its people.
But it comes with its own limitations which are as follows:
It does not provide us with information regarding non-economic goods and services.
Also, the average income does not reflect the true picture of the income distribution.