Question

Explain what is the meaning by noneconomic activities? why GDP cannot calculate such activities? explain briefly

Answer 1

Non economic activities are those activities whose aim is to satisfy social, emotional & psychological needs. They are not performed with an objective of earning money or creating wealth. The objective behind performing these activities is love, affection, sympathy, patriotism or social concern. These activities are not measured in terms of money. For example: playing football with friends, dancing, a housewife cooking food for her family, a person going to temple to offer prayer, etc.

GDP is the value of all final goods & services produced in an economy during a given period of time. It measures only economic activities, activities that are measured in terms of money. It does not measures economic welfare or happiness. Non-economic activities are productive activities but are not performed in the market, these activities take place outside the market, so, GDP fails to measure them. These non economic activities have vital impact on our standard of living but still GDP fails to measure them. These are activities like housework, unpaid childcare, cooking dinner, etc. So, it is one of the limitations of GDP which can lead to understating of economic activity & living standards of an economy.