Why do citizens experience low standards of living despite improvement in the per capita income?

      

Explain the reasons why citizens experience low standards of living despite improvement in the per capita income.

  

Answers


Maurice
(i) Difficulty in measuring welfare: People’s wants/ aspirations keep on changing/ their tastes change over time, hence per capita income method is not the best measure of their welfare.

(ii) People’s extraneous works/ over sacrifice: Increased national income may mean less sleep and worries/ people do not have time to enjoy what they produce/ their welfare may be low despite the rise.

(iii) Income distribution: If the income is in the hands of few, then we cannot say that people’s welfare has improved.

(iv) Nature of products: If the products are not meant to satisfy immediate wants of the people, then an increase in per capita income may not lead to a higher economic welfare.

(v) Change in the value of money: If the currency has been devalued, there can be change in the value of money without necessarily representing any changes in the welfare of people.

(vi) Social costs: Some people may migrate from rural to urban areas thus straining family relationship/ increase in industries may create pollution/ congestion/ other environmental disruptions such as development may make the average citizen worse off than was before the increase in per capita income.

(vii) Quantity of goods/services produced: Did the increase in per capita income come from increased production of goods and services?

(viii) Change in population: If a static population is assumed, a false higher state of the economic welfare of the people will be the result.

(ix) Statistical problem: Data collection (National income) may be inaccurate hence wrong per capita income.

maurice.mutuku answered the question on June 28, 2017 at 11:56


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