Question

(Essay)

APPLICATION 1 – Gross Domestic Product:

The Links between Self-Reported Happiness and GDP

APPLYING THE CONCEPTS #3: Do increases in gross domestic product necessarily translate into improvements in the welfare of citizens?

Answer 1

ANSWER -

The increase in GDP means the increase in the value of goods and services produced in the economy. But the increase in the GDP is not necessarily related to the increase in the welfare of the human beings. The GDP in its calculation does not involve the transfer payments which are received by the public from the government which increases the welfare of the human beings. Hence the complete welfare of the humans is not determined by the increased GDP.

The value of the goods and services to very some extent, because they form the part of the final consumption contribute to the welfare but when we go deep into the welfare theory, we do not consider is as the only component of the welfare . Hence the GDP along with the other main factors such as the health facilities, social security benefits form the part of the human welfare all together.

All the people do not benefit from the GDP growth, hence the welfare is not evenly spread. The people who are able to consume the goods and services in a proper way have more well off status in comparison to the people who are not able to properly consume due to the lower incomes. Hence the per capita income forms the basis of the level of consumption which also helps in determining the welfare of the humans.

To conclude we can say that the GDP brings the feeling of the material well being inside the humans hence its gives them satisfaction and can be called as a measure of the welfare together with the other factors listed before.