Q2. Explain why,due to the presence of externalities,real GDP in itself cannot be treated as a true index of welfare. Plzz Give me economices 2 question answer?
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In open economy Externalities play important role in economy and also affected real gdp. For example
Immunization against a contagious infection confers the benefits directly to the person getting incoluted. But it also indirectly benefits others because the chances of their contracting the disease from affected person are reduced when he gets incoluted. So this is benefit of an Externality. Also pollution which is example of negative Externality. So in this way Externalities may cost you or give benefit. That is why gdp of country cannot be treated as true index of welfare and also in today's world it plays very important role
Immunization against a contagious infection confers the benefits directly to the person getting incoluted. But it also indirectly benefits others because the chances of their contracting the disease from affected person are reduced when he gets incoluted. So this is benefit of an Externality. Also pollution which is example of negative Externality. So in this way Externalities may cost you or give benefit. That is why gdp of country cannot be treated as true index of welfare and also in today's world it plays very important role
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