(i) Difficulty in measuring welfare: People’s wants/ aspirations keep on changing/ their tastes change over time, hence per capita income method is not the best measure of their welfare.
(ii) People’s extraneous works/ over sacrifice: Increased national income may mean less sleep and worries/ people do not have time to enjoy what they produce/ their welfare may be low despite the rise.
(iii) Income distribution: If the income is in the hands of few, then we cannot say that people’s welfare has improved.
(iv) Nature of products: If the products are not meant to satisfy immediate wants of the people, then an increase in per capita income may not lead to a higher economic welfare.
(v) Change in the value of money: If the currency has been devalued, there can be change in the value of money without necessarily representing any changes in the welfare of people.
(vi) Social costs: Some people may migrate from rural to urban areas thus straining family relationship/ increase in industries may create pollution/ congestion/ other environmental disruptions such as development may make the average citizen worse off than was before the increase in per capita income.
(vii) Quantity of goods/services produced: Did the increase in per capita income come from increased production of goods and services?
(viii) Change in population: If a static population is assumed, a false higher state of the economic welfare of the people will be the result.
(ix) Statistical problem: Data collection (National income) may be inaccurate hence wrong per capita income.
maurice.mutuku answered the question on June 28, 2017 at 11:56
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