Question

What is a major limitation of using per capita income as a measure of economic well-being?

• A. It overlooks the importance of access to public services and quality of life.
• B. It does not account for income inequality.
• C. It does not consider the value of non-market activities such as household production or volunteer work.
• D. It is difficult to compare across countries due to varying purchasing power parities.

Answer 1

Answer:

B. It does not account for income inequality.

• Per capita income is an average and can be misleading.

• A country might have a high per capita income but suffer from extreme income inequality, where a small percentage of the population earns most of the wealth.