What are the Limitations of Average Income and Per Capita Income?

By Mandeep Kumar|Updated : January 6th, 2023

The limitations of average income and per capita income are social factors like health, education, and others while exclusively discussing the economic quality of life. The amount of money made per capita in a country or region is expressed as per capita income. The average per capita income for an area can be calculated using per capita income. 

Limitations of Average Income and Per Capita Income

The average per capita income can also be used to assess the standard of living and quality of life of a population. Average income is the amount of money that each person earns on average in a particular place over a period of time.

  • Income distribution cannot be estimated from per capita income. Most of the wealth may end up in the hands of a select few.
  • It is better to have a poor society with equitable distribution of wealth than a prosperous nation with unequal income distribution.
  • Many facilities affecting the quality of life like educational and medical facilities are not considered while computing per capita income. It is affected by population density. 

Based on the above evaluation, we can also say that the countries with high national incomes and significant populations will also have low per capita income.

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FAQs on Limitations of Average Income and Per Capita Income

  • Social factors like health, education, and others while exclusively discussing the economic quality of life are the limitations of average income and per capita income.

  • The income gap between the rich and the poor is not shown by average income. Additionally, it does not display the available degree of education and health status.

  • To assess a population's standard of living, per capita income is used to calculate the average per-person income. The limits of per capita income as a measure include its inability to account for inflation, income inequality, poverty, wealth, or savings.

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