Question

what is average income? what is its importance? mention its limitations related to development.

Answer 1

Average income of per capita income of a country is the GDP of that country divided by the population of that country.

Average income is important because it is widely used as an indicator of the level of development of a country. It is a general measure of the prosperity and standard of living of the population of the country.

However, as an indicator of development, it also has certain limitations. They are

1. Since it is an average measure, it can conceal significant inequality in the distribution of income in a country. Average income may be high because there are a few very rich people and a large number of poor people. In that case, high average income will not indicate high level of development.

2. Average income does not take into account other significant indicators of development like life expectancy and literacy rate.

3. Average income does not take into account factors like environmental degradation and resource depletion which may make long term economic development unsustainable.