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A digital service is free to users but increases their convenience or enjoyment. Which limitation of GDP measurement does this illustrate?

Answer and explanation

Correct answer: The consumer benefit that has no market price is not fully captured in GDP

GDP measures production using market values, so the extra benefit users receive from a free service—such as convenience or enjoyment—is not fully captured as consumer welfare. The service’s production may still be counted if it has market-valued revenue or costs, but that does not measure the full benefit to users. Thus A is correct.

Related tags

Gdp And WelfareNon-Market BenefitsNational Income And Related AggregatesEconomicsClass 11 Mcq

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