Submitted By:
Ali Tahir
Roll Number: FA14-EMBA-034-CVC
Assignment 2
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Do you think that Higher GDP shows higher standard of living? Explain your answer with logical justifications.
Higher GDP does not show a higher standing standard.
GDP does not measure happiness, or well-being, or what economists call utility. As a gross measure, it aggregates data for a geographic area, ignoring important distributional questions and individual preferences. It does not account for the value of a nation’s stock of assets and liabilities. GDP is not a good measure for the well-being of a nation because more populated countries generally have a higher GDP whereas the people as a whole may not be enjoying a high living standard.
Some reasons how this is justified can be: 1. Free time or leisure is not included in GDP analysis. While someone may be happier only working three days a week, that additional day off will reduce the GDP value. It is possible for very industrious country have a very high GDP, but its entire people could be overworked and sick which would turn to a poor wellbeing number. 2. GDP measures total production for a nation, and GDP per capita gives an average amount of output per person. However it does not tell how GDP is divided among its residents.

3. Some services and products included in the GDP measure actually lower our well-being. When expenditures on services are made it doesn’t necessarily mean that they improve country’s wellbeing. 4. GDP focus on goods and services sold in the market creates a measurement problem. In the social world, there are a large number of activities do not enter the market such as housework, home care, volunteer work and community service etc., but these things are extremely important for wellbeing. Thus, a society in where lonely and