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The Role of Aggregation in Economic Analysis
A government report states that the 'average household income' in a country increased by 3% last year. A critic argues this statistic is misleading because it ignores the fact that the income for the wealthiest 10% of households grew by 15%, while the income for the bottom 50% of households stagnated. From the perspective of studying the economy as a whole, explain the primary reason why economists use broad averages like 'average household income' despite such criticisms. Then, identify the main limitation of this approach that the critic's point highlights.
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