Why is GDP not considered a perfect measure of welfare?
Answer and explanation
Correct answer: Because it does not fully reflect income distribution and non-market factors
GDP measures the value of market production, but economic welfare depends on several additional factors. GDP does not reveal how income is distributed, and it generally excludes unpaid household work, leisure, many informal services, and the quality of the environment. It may even rise after pollution or damage-related expenditure. Hence GDP is useful for measuring output but is not a complete or perfect measure of welfare.
Frequently asked questions
What is the correct answer to this question?
Because it does not fully reflect income distribution and non-market factors
Why is this the correct answer?
GDP measures the value of market production, but economic welfare depends on several additional factors. GDP does not reveal how income is distributed, and it generally excludes unpaid household work, leisure, many informal services, and the quality of the environment. It may even rise after pollution or damage-related expenditure. Hence GDP is useful for measuring output but is not a complete or perfect measure of welfare.
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.
