If fuel sales rise because commuting becomes longer in a city what effect on welfare is possible?
Answer and explanation
Correct answer: GDP may rise but welfare may fall because of time loss and pollution
Fuel purchased for longer commuting is a market transaction and can add to measured GDP, provided it represents counted final expenditure. Yet longer travel consumes time that could be used for leisure or family activities, and extra fuel use can create congestion and pollution. These external and non-market costs may reduce welfare even as market sales increase. Therefore B is correct; A is too absolute, while C and D are false.
Frequently asked questions
What is the correct answer to this question?
GDP may rise but welfare may fall because of time loss and pollution
Why is this the correct answer?
Fuel purchased for longer commuting is a market transaction and can add to measured GDP, provided it represents counted final expenditure. Yet longer travel consumes time that could be used for leisure or family activities, and extra fuel use can create congestion and pollution. These external and non-market costs may reduce welfare even as market sales increase. Therefore B is correct; A is too absolute, while C and D 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.
