If no base-year price exists for a new digital service, how may its price change be estimated?
Answer and explanation
Correct answer: Using a comparable service or a quality-adjusted price
A newly introduced digital service has no directly observed price in the base year, so a statistical agency cannot simply compare its current price with a missing historical price. It may use the price movement of a sufficiently comparable service or estimate a quality-adjusted price that separates changes in features, performance, and service quality from pure inflation. Treating the price as zero or as an import would misclassify the service and distort real GDP and the deflator.
Frequently asked questions
What is the correct answer to this question?
Using a comparable service or a quality-adjusted price
Why is this the correct answer?
A newly introduced digital service has no directly observed price in the base year, so a statistical agency cannot simply compare its current price with a missing historical price. It may use the price movement of a sufficiently comparable service or estimate a quality-adjusted price that separates changes in features, performance, and service quality from pure inflation. Treating the price as zero or as an import would misclassify the service and distort real GDP and the deflator.
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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