Question

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

Answer 1

1. Statistical data problems- national income may be inaccurate hence wrong per capita income
2. Income distribution-when the income is in the hands of a few people, we cannot say that welfare has improved.
3. Nature of products- when products are not meant to satisfy immediate wants of citizens per capita income may not bring economic welfare
4. change in money value-when money has been devalued, per capita increase will not bring peoples’ welfare
5. Social cost- some people may migrate from rural to urban areas. Straing family relationship / increase in industrial growth may cause pollution which may make those citizens worse than before
6. Difficult in measuring welfare- peoples aspiration and wants keeps on changing hence per capita income is not the best way to measure welfare
7. Change in population- if a static population is assumed higher economic welfare will be the result