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Explain five limitations of using per capita income to compare living standards of people in different countries.

      

Explain five limitations of using per capita income to compare living standards of people in
different countries.

  

Answers


gideon
Inequality in income distribution– Per capita income in one country may be high but in the
hands of very few people while another country may have lower per capita income but
evenly distributed.
Inappropriate application of national income- per capita income in one country may be high
but used in a way that does not benefit citizens while in another country it may be used to
finance project that benefit the masses directly.
Effects on people’s health
High per capita income in one country could be achieved at the expense of people’s health
and unconstructive working conditions.
Different interpretations of national income. One country may interpret per capita income
as GDP while another country as NNP at factor cost. Non-marketed output– A country
heavily relying on subsistence sector of un-marketed output may not be compared with
another that doesn’t.
Price structure – This may be different in different countries e.g. food stuffs may be
cheaper in one country compared to another.
Use of different currencies – The values of different currencies cannot be accurately
determined through exchange rates/change in values of money. -Different tastes, lifestyles
and cultures in different currencies. -Different in government expenditure from revenue
collected in different countries. -Different levels and sizes of subsistence sector.
-Inaccurate data collection used in the calculating of national income. -Different political
system in ideologies which influence the outcome of national income.
gideon1 answered the question on September 27, 2017 at 17:15


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