If crime declines and demand for private security services falls, what is possible?
Answer and explanation
Correct answer: Some market activity may fall while welfare rises
GDP counts paid production and expenditure, not every improvement in safety or peace of mind. When crime falls, households and firms may spend less on private security, so that particular market activity can decline. However, people may experience greater safety, less fear and fewer losses, which raises social welfare. Therefore option D is correct. A wrongly assumes GDP and welfare always move together, while B and C are false.
Frequently asked questions
What is the correct answer to this question?
Some market activity may fall while welfare rises
Why is this the correct answer?
GDP counts paid production and expenditure, not every improvement in safety or peace of mind. When crime falls, households and firms may spend less on private security, so that particular market activity can decline. However, people may experience greater safety, less fear and fewer losses, which raises social welfare. Therefore option D is correct. A wrongly assumes GDP and welfare always move together, while B and C are false.
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.
