Question

What are the limitations of average income and per capita income

Answer 1

The following are the limitations of per capita income:

• The rise in per capita income is due to a rise in prices. An increase in physical output has no contribution, therefore, it is not a reliable index of economic development.
• The rich become richer and the poor become poorer because of the distribution of the per capita.
• The non-marketed goods and services are not taken into consideration while calculating the per capita.