Which example illustrates the limitation of GDP in measuring improvements in quality?
Answer and explanation
Correct answer: Healthcare becomes better at the same price, but the added value is not fully recorded
GDP mainly records the market value of goods and services produced. When quality improves without a corresponding increase in the observed price, the statistical measure may fail to capture the complete benefit received by consumers. Thus, GDP can underestimate welfare gains from better healthcare, education, safety, or product quality.
Frequently asked questions
What is the correct answer to this question?
Healthcare becomes better at the same price, but the added value is not fully recorded
Why is this the correct answer?
GDP mainly records the market value of goods and services produced. When quality improves without a corresponding increase in the observed price, the statistical measure may fail to capture the complete benefit received by consumers. Thus, GDP can underestimate welfare gains from better healthcare, education, safety, or product quality.
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.
