What are the uses and limitations of average income?

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Solution

Average income is calculated by the 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 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 the non-economic goods and services.

Also, the average income does not reflect the true picture of the income distribution.

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