Page 12 - Understanding Economics for Class 10

3. Assume there are four families in a country. The average per capita income of these families
is `5000. If the income of three families is ` 4000, `7000 and `3000 respectively, what is the
income of the fourth family?
(a) `7500 (b) ` 3000 (c) `2000 (d) `6000
Goyal Brothers Prakashan
Ans. (d) `6000
Total income of four families = 5000 × 4 = 20000.
Total income of three families = 4000 + 7000 + 3000 = 14000
Income of the fourth family = 20000 – 14000 = 6000

4. What is the main criterion used by the World Bank in classifying different countries? What
are the limitations of this criterion, if any?
Ans. The criterion used is per capita income.
Limitations:
(i) It covers only the economic aspect ignoring factors like infant mortality rate, literacy rate,
no attendance ratio for class I-v, etc which are important indicators for development.
(ii) This method also does not provide us the distribution of different levels of income.

5. In what respects is the criterion used by the UNDP for measuring development different from
the one used by the World Bank?
Ans. World Bank
(i) Per capita income is the base for comparison.
(ii) It is a narrow concept of development.
(iii) Countries have been divided into three categories, i.e., the rich countries, the middle-income
countries and the poor countries.
UNDP
(i) UNDP has taken education, health and the per capita income as the base.
(ii) It is a broader concept of development,
(iii) Countries have been ranked.

6. Why do we use averages? Are there any limitations to their use? Illustrate with your own
examples related to development.
Ans. (i) Average is a single value which summarises the characteristics of mass of data. Since
countries have different populations, total income does not tell us what an average person is
likely to earn. This is known by average income. That is why, we use averages or average
income for measuring development.
(ii) Yes, there are following limitations to their use:
(a) An average is influenced by extreme values.
(b) An average may not give an idea about the formation of the series.
Hence, average income does not tell us how this income is distributed among people.
For example,
(a) Only 54% of rural female in Uttar Pradesh are literate while the national average of
literacy rate of India was 74% for 2011.
(b) Per capita income of Bihar for 2015-16 was `34,409 while that of India for the same
year was `77,826. Thus, average hide disparities.
7. Kerala, with lower per capita income has a better human development ranking than Haryana.
Hence, per capita income is not a useful criterion at all and should not be used to compare
states. Do you agree? Discuss.
Ans. Yes, I agree that money income or per capita income is not the only factor. Factors like Infant
Mortality Rate, Literacy Rate and Net Attendance Ratio are also very crucial for overall human
development. In this case Kerala is better than Haryana.
E-10 Economics Class X