Pollution increases sales of medicines and air purifiers in an economy. What is the most appropriate interpretation?
Answer and explanation
Correct answer: Market output may rise while welfare falls because of the original environmental damage
GDP measures the market value of final goods and services, so medicines and air purifiers sold in markets can increase measured output. However, these purchases may be defensive expenditures: they repair or protect against pollution damage rather than create a comparable gain in well-being. Therefore, market production can rise while overall welfare falls because health, environmental quality, and peace of mind have worsened. Option C captures this distinction; A confuses GDP with welfare, while B and D are factually incorrect.
Frequently asked questions
What is the correct answer to this question?
Market output may rise while welfare falls because of the original environmental damage
Why is this the correct answer?
GDP measures the market value of final goods and services, so medicines and air purifiers sold in markets can increase measured output. However, these purchases may be defensive expenditures: they repair or protect against pollution damage rather than create a comparable gain in well-being. Therefore, market production can rise while overall welfare falls because health, environmental quality, and peace of mind have worsened. Option C captures this distinction; A confuses GDP with welfare, while B and D are factually incorrect.
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.
