If a country's GDP rises mainly because more luxury goods are produced instead of essential goods, what may happen to welfare?
Answer and explanation
Correct answer: Welfare need not rise equally
The governing concept is that GDP measures the market value of final output, not the fairness, usefulness, or distribution of that output. If production increases mainly for luxury consumption while essential goods remain scarce or unaffordable, aggregate GDP can rise without improving the living conditions of most people. Therefore, option B is correct. Option A is too absolute; C and D do not logically follow from a change in the composition of output.
Frequently asked questions
What is the correct answer to this question?
Welfare need not rise equally
Why is this the correct answer?
The governing concept is that GDP measures the market value of final output, not the fairness, usefulness, or distribution of that output. If production increases mainly for luxury consumption while essential goods remain scarce or unaffordable, aggregate GDP can rise without improving the living conditions of most people. Therefore, option B is correct. Option A is too absolute; C and D do not logically follow from a change in the composition of output.
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.
