Internet service quality improves greatly while its price remains nearly unchanged. Why may GDP understate the welfare gain?
Answer and explanation
Correct answer: Because the full value of quality improvement may not appear in the market price
The governing concept is the difficulty of measuring quality change and consumer surplus in GDP. If internet speed, reliability or usefulness improves while the price remains nearly unchanged, consumers receive greater satisfaction and real benefit. However, the unchanged transaction price may record little additional nominal market value. Therefore option C is correct; the other options falsely deny output or introduce irrelevant claims.
Frequently asked questions
What is the correct answer to this question?
Because the full value of quality improvement may not appear in the market price
Why is this the correct answer?
The governing concept is the difficulty of measuring quality change and consumer surplus in GDP. If internet speed, reliability or usefulness improves while the price remains nearly unchanged, consumers receive greater satisfaction and real benefit. However, the unchanged transaction price may record little additional nominal market value. Therefore option C is correct; the other options falsely deny output or introduce irrelevant claims.
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.
