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

The amount of money made per person in a country or region is expressed as per capita income. The average per-person income for a region can be calculated using per capita income, which can also be used to assess the population's standard of living and quality of life. The amount of money each person makes on average over some time in a particular location is called the average income.

Limitations of Average Income and Per Capita Income

The income distribution cannot be inferred from per capita income. The majority of wealth could end up in the hands of a select few. Better than a prosperous nation with an unequal income distribution is a poor society with an equal distribution of wealth. The numerous facilities that affect the quality of life, like educational and medical facilities, are not considered when calculating per capita income. It is impacted by population density. Even in countries with high national incomes and significant populations, per capita income will be low.

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  • 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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