A student studies independently and then purchases the same teaching service from a private tutor. What is the GDP difference?
Answer and explanation
Correct answer: The paid tutoring service enters GDP while self-study does not
GDP generally measures market-valued production within the production boundary. A private tutor supplies a paid educational service, so the transaction has a recorded market value and is included in GDP, subject to normal accounting rules. Independent self-study may create substantial personal benefits, but it is an unpaid household or personal activity and has no observed market price in national accounts. Thus the paid tutoring option raises measured GDP relative to self-study.
Frequently asked questions
What is the correct answer to this question?
The paid tutoring service enters GDP while self-study does not
Why is this the correct answer?
GDP generally measures market-valued production within the production boundary. A private tutor supplies a paid educational service, so the transaction has a recorded market value and is included in GDP, subject to normal accounting rules. Independent self-study may create substantial personal benefits, but it is an unpaid household or personal activity and has no observed market price in national accounts. Thus the paid tutoring option raises measured GDP relative to self-study.
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.
