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.
Frequently asked questions
What is the correct answer to this question?
GDP may rise but users' net welfare need not increase
Why is this the correct answer?
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.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
