What is a major difficulty in using GDP as a complete measure of welfare?
Answer and explanation
Correct answer: Many social and non-monetary benefits and costs are not reflected in market prices
The governing concept is the distinction between economic production and comprehensive welfare. GDP adds the market value of final goods and services produced, but many important effects—such as unpaid household work, leisure, pollution, inequality, safety and consumer surplus—are not fully recorded at market prices. Therefore GDP is useful for tracking production but cannot alone measure welfare. Option A states this limitation; B, C and D are factually incorrect.
Frequently asked questions
What is the correct answer to this question?
Many social and non-monetary benefits and costs are not reflected in market prices
Why is this the correct answer?
The governing concept is the distinction between economic production and comprehensive welfare. GDP adds the market value of final goods and services produced, but many important effects—such as unpaid household work, leisure, pollution, inequality, safety and consumer surplus—are not fully recorded at market prices. Therefore GDP is useful for tracking production but cannot alone measure welfare. Option A states this limitation; B, C 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.
