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Free digital services save people's time and money. Why may GDP understate this benefit?

Answer and explanation

Correct answer: Because a free service is recorded at little or no market value

The governing concept is that GDP records the market value of current production, not every benefit received by consumers. A free digital service may save time, reduce travel or provide information, creating substantial consumer surplus, but its direct transaction price can be zero. Consequently, much of its value is absent from measured GDP. Options A and B are false, and time saving normally supports rather than reduces welfare.

Related tags

Free Digital ServicesConsumer SurplusGdp LimitationGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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