If improved public transport reduces private fuel consumption and saves time, how may GDP and welfare change?
Answer and explanation
Correct answer: Welfare may rise even if fuel sales decline
GDP counts market transactions, so lower private fuel sales may reduce one component of measured expenditure. Welfare, however, also depends on non-market and wider social benefits. Faster travel saves people’s time, and reduced fuel use may lower pollution, congestion, and health damage. Thus option A is correct: welfare can improve even when a particular market sale declines. The other choices wrongly equate one GDP component with total welfare.
Frequently asked questions
What is the correct answer to this question?
Welfare may rise even if fuel sales decline
Why is this the correct answer?
GDP counts market transactions, so lower private fuel sales may reduce one component of measured expenditure. Welfare, however, also depends on non-market and wider social benefits. Faster travel saves people’s time, and reduced fuel use may lower pollution, congestion, and health damage. Thus option A is correct: welfare can improve even when a particular market sale declines. The other choices wrongly equate one GDP component with total welfare.
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.
