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If improved public transport reduces private fuel consumption and saves time, how may GDP and welfare change?

Answer and explanation

Correct answer: Welfare may rise even if fuel sales decline

GDP counts market transactions, so lower private fuel sales may reduce one component of measured expenditure. Welfare, however, also depends on non-market and wider social benefits. Faster travel saves people’s time, and reduced fuel use may lower pollution, congestion, and health damage. Thus option A is correct: welfare can improve even when a particular market sale declines. The other choices wrongly equate one GDP component with total welfare.

Related tags

Public TransportTime SavingFuel ConsumptionWelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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