Why do we use average income to development of country? What are the limitations of using it?
Answers
Answer:
Averages are used for better understanding. (ii) For comparison between countries, total income is not very useful. ... Limitation : Average income does not depict how the income is distributed among the people. Some may be very rich but the masses may be poor.
Explanation:
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.