If tourism raises income in a region but waste and congestion increase greatly, how should net welfare be measured?
Answer and explanation
Correct answer: By deducting environmental and congestion costs from income gains
The governing idea is net social benefit: welfare depends on benefits as well as costs imposed on residents and the environment. Tourism may increase sales, wages, tax revenue, and measured GDP, but waste disposal, traffic delays, noise, pollution, and loss of local amenity reduce welfare. A proper assessment therefore compares the income gains with these external costs and deducts them where possible. Options A–C measure only one benefit.
Frequently asked questions
What is the correct answer to this question?
By deducting environmental and congestion costs from income gains
Why is this the correct answer?
The governing idea is net social benefit: welfare depends on benefits as well as costs imposed on residents and the environment. Tourism may increase sales, wages, tax revenue, and measured GDP, but waste disposal, traffic delays, noise, pollution, and loss of local amenity reduce welfare. A proper assessment therefore compares the income gains with these external costs and deducts them where possible. Options A–C measure only one benefit.
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.
