Suppose records show that the average income in a country has been increasing over a period of time. From this, can we conclude that all sections of the economy have become better? Illustrate your answer with an example.
No, we cannot conclude that all sections of the economy have become better just because the average income in a country has been increasing. While averages are useful for comparison, they also hide disparities.
Average income is the total income of the country divided by its total population. However, this measure does not tell us how this income is distributed among people. An increase in average income might mean that the rich are getting richer while the poor remain poor, which does not indicate development for all sections.
We can illustrate this with the example of two countries, A and B, which have identical average incomes. In Country A, the monthly incomes of the five citizens are 9500, 10500, 9800, 10000, and 10200. This shows an equitable distribution where people are neither very rich nor extremely poor.
In contrast, in Country B, four citizens earn only 500 each, while one citizen earns 48,000. Here, most citizens are poor, and only one person is extremely rich. Thus, despite a high average, the majority of the population in Country B is not better off. Therefore, average income alone is not a sufficient indicator; the distribution of income is equally important to ensure all sections of the economy improve.
Explanation
The textbook uses the comparison between Country A and Country B to demonstrate that 'averages hide disparities.' Even if the average income is the same (or increasing), it does not reveal the distribution of that income. In the example provided in the text, Country B has a high average income, but it is skewed because one person is extremely rich while the others are poor. This proves that a rise in average income does not necessarily mean all sections of the economy are better off.