Question

"There are now many products whose quality is complex, multi-dimensional and subject to rapid change”. Many of these goods and services have decreased in price. Name one type of good or services where there have been substantial increases in its quality. Have increases in quality been accompanied by commensurate increases in their prices? Discuss the implication for GDP as a measure of economic welfare, especially in those countries that specialise in producing these services?

Answer 1

Mobile phone is a good, which increases its quality; such increase in quality comes gradually, year after year; earlier mobile was used only for talking but now it is used for several purposes, like internet surfing, capturing photos and videos, etc; such new generation phone is called Smartphone.

Although it is now used multipurpose, its price is not increased so heavily. Increasing technology is blessing for such.

Countries like Japan and China are specialized in producing such good. Since they are specialized, they are producing goods at lower opportunity cost compare to the other countries. It increases country’s export, which is a part of country’s GDP; increasing export increases GDP, which actually increases economic welfare as a whole.