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A digital service was previously free but is now sold through subscriptions. If usage remains unchanged what may happen?

Answer and explanation

Correct answer: GDP may rise but users' net welfare need not increase

GDP records measured market transactions, so charging a subscription can create recorded market output or expenditure that was absent when the service was free. However, users now pay for the same usage, and the payment reduces their disposable resources. Therefore GDP may rise while net welfare is uncertain; option D is correct. The words “definitely” make the other options unjustified.

Related tags

Digital-ServicesFree-GoodsSubscriptionGdp-WelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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