Why do we use averages? Are there any limitations to their use? Illustrate with your own examples related to development.
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Solution
This answer will help in understanding the importance of averages while comparing development of two different nations.
One of the most important attributes for comparing different countries is their income.
Total income is not a useful measure for comparison between countries.
The income of all the residents of a nation is the total income of the nation.
Average income is the total income of the nation divided by its total population. Hence, the right measure used in comparing different nations is comparison of average incomes of nations.
Comparing total income will not help in estimating what an average person is likely to earn, since countries have different populations.
Per capita income is nothing but the average income.