Correct Option
The correct option is It allows for a comparison of the economic capacity of an average individual across countries with different populations..
Explanation
Average Income, technically known as Per Capita Income, is calculated by dividing the total income of a country (National Income) by its total population. It serves as a standard metric for comparing the economic development levels of different nations, as used by the World Bank in its World Development Reports.
Statement-wise Analysis
- It is the only data available for all countries. is Incorrect. Average income is not the only data available. Various other indicators, such as the Human Development Index (HDI), Gini coefficient (for inequality), and health or education statistics, are available for international comparisons.
- It allows for a comparison of the economic capacity of an average individual across countries with different populations. is Correct. Countries vary significantly in population size. Comparing total National Income alone is insufficient because a country with a large population may have a high total income but a low standard of living for individuals. Average income neutralizes the population factor, allowing for a comparison of the likely economic capacity of an average individual across countries with different demographics.
- It perfectly reflects the standard of living of the poorest sections of society. is Incorrect. A major limitation of average income is that it hides disparities. It does not account for income distribution; a country can have a high average income while a significant portion of its population remains poor. Therefore, it does not perfectly reflect the standard of living of the poorest sections.
- It is mandated by the United Nations Charter. is Incorrect. The use of average income is a statistical convention adopted by economic organizations like the World Bank and the IMF. It is not a mandate enshrined in the United Nations Charter, which primarily deals with international peace, security, and cooperation.
Key Takeaway
Average Income (Per Capita Income) is used for international comparisons because it adjusts total national income against population size, enabling a standardized comparison of individual economic capacity, despite its inability to reveal income inequality.