In development, the average value is often used to compare different countries with respect to their income. Since different countries have different populations, total income does not work as a good comparative measure. Average value of income is derived by dividing the total income of the country by the total population and is also called per capita income. Although average income is used for comparison purposes, it is not an absolute measure as it can hide disparities as it does not state whether the income distribution is equitable or not. In the following table, we see the income distribution of two different countries.
|
Monthly Income in Rupees |
Average Income |
| Citizen A |
Citizen B |
Citizen C |
Citizen D |
Citizen E |
| Country A |
10,000 |
1000 |
4000 |
3000 |
2000 |
4000 |
| Country B |
2000 |
5000 |
5000 |
5000 |
3000 |
3800 |
From the above table, it is evident that Country A enjoys a higher average income than country B. But Country B has a more equitable distribution of income than country A. Thus, the average value is limited as it does not provide a clear picture.
