Which of the following most clearly shows the effect of the composition of GDP on welfare?
Answer and explanation
Correct answer: Equal values of healthcare and harmful goods may have different welfare effects
The governing concept is the composition, or quality, of output. GDP adds the monetary value of final goods and services, but equal monetary totals do not guarantee equal social usefulness. Healthcare can improve health and capabilities, whereas harmful goods may create addiction, illness, or social costs. Therefore option C is correct. Options A, B, and D wrongly assume that only the amount of output matters and ignore what is being produced.
Frequently asked questions
What is the correct answer to this question?
Equal values of healthcare and harmful goods may have different welfare effects
Why is this the correct answer?
The governing concept is the composition, or quality, of output. GDP adds the monetary value of final goods and services, but equal monetary totals do not guarantee equal social usefulness. Healthcare can improve health and capabilities, whereas harmful goods may create addiction, illness, or social costs. Therefore option C is correct. Options A, B, and D wrongly assume that only the amount of output matters and ignore what is being produced.
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.
