Question

Increase in per capital real income means increase in per capital availability of goods and services. Does it necessarily mean rise in the walfare of the people of the country? Give any one argument in support of your ansewer and explain the same.

Answer 1

Increase in per capita availability of goods and services does raise the standard of living and consequently welfare. But it may not necessarily always be so. For example, manufacturing etc. does raise output but at the same time also leads to water and air pollution which reduces welfare of the people. Such a reduction in welfare may outweigh the increase in welfare and thus lead to overall reduction in welfare.