Answer:
GDP is an imperfect measure of Economic well being because of : Production of - Non Monetary Exchange goods , Positive & Negative Externalities goods, Negative Impact goods.
Explanation:
GDP is the total value of goods & services produced by an economy during a period of time.
Although reflecting flow of goods & services in an economy, GDP is still not a perfect measure of well being because :
- Non Monetary Exchange Goods : Services of family members (housewives), leisure production (eg painting) are non monetary.
- Positive & Negative Externalities Goods: Benefit or harm to un-involved party, without any monetary exchange. Eg - Education, Pollution.
- Negative Impact Goods : Goods consumption leading to well being loss rather than well being gain. Eg- Addiction (Alcohol / Smoking).
All these goods change well being : Non Monetary Exchange Goods increase well being , Positive Externalities increase welfare , Negative Externalities decrease welfare , Negative Impact goods decrease welfare.
But, these are still not included in GDP evaluation. So, all these make GDP an imperfect measure of well being.
