What does the exclusion of resale of a used good imply for welfare analysis?
Answer and explanation
Correct answer: A change of ownership may create utility, but GDP does not rise because there is no current production
GDP records the value of goods and services produced during the current period, so the original sale of a good is counted when it is newly produced. A later resale usually transfers ownership rather than creating another newly produced good. The buyer may still receive satisfaction or utility from using it, but that welfare is not recorded as additional current GDP. Thus option C correctly separates utility from measured production.
Frequently asked questions
What is the correct answer to this question?
A change of ownership may create utility, but GDP does not rise because there is no current production
Why is this the correct answer?
GDP records the value of goods and services produced during the current period, so the original sale of a good is counted when it is newly produced. A later resale usually transfers ownership rather than creating another newly produced good. The buyer may still receive satisfaction or utility from using it, but that welfare is not recorded as additional current GDP. Thus option C correctly separates utility from measured production.
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.
