If free education is provided in a government school, how is its value estimated in GDP?
Answer and explanation
Correct answer: On the basis of government cost or expenditure
Government education is generally a non-market service because it is supplied without a directly observed market price to the student. National accounts therefore estimate its value mainly from the cost of producing the service, including compensation of teachers and staff, intermediate inputs, and relevant operating expenses. Free provision does not mean that no production occurred, so its estimated value can enter GDP.
Frequently asked questions
What is the correct answer to this question?
On the basis of government cost or expenditure
Why is this the correct answer?
Government education is generally a non-market service because it is supplied without a directly observed market price to the student. National accounts therefore estimate its value mainly from the cost of producing the service, including compensation of teachers and staff, intermediate inputs, and relevant operating expenses. Free provision does not mean that no production occurred, so its estimated value can enter GDP.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
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