Clean air is freely available in an economy. Why is its value generally not added to GDP?
Answer and explanation
Correct answer: Because it has no explicit market price
GDP is calculated mainly from recorded market transactions involving final goods and services. Clean air provides a substantial benefit, but when it is freely available, no buyer normally pays a measurable market price for that environmental service. Consequently, its welfare value is usually omitted from GDP. Option B is unrelated, option C misclassifies air, and option D is false because clean air clearly improves health and well-being.
Frequently asked questions
What is the correct answer to this question?
Because it has no explicit market price
Why is this the correct answer?
GDP is calculated mainly from recorded market transactions involving final goods and services. Clean air provides a substantial benefit, but when it is freely available, no buyer normally pays a measurable market price for that environmental service. Consequently, its welfare value is usually omitted from GDP. Option B is unrelated, option C misclassifies air, and option D is false because clean air clearly improves health and well-being.
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.
