ECON 104 Chapter Notes - Chapter 10: Genuine Progress Indicator, Net Domestic Product, Resource Depletion

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Limitation of gdp (gross domestic product/gross national product: gdp is not a good measure of human well-being- Human well-being depends on consumption of goods and services, but on many other factors as well (monetary- account in the computing national income vs non-monetary activities- household production, leisure time activities) Home production is a major component of economic activity in most places. Because of that, it can change how one country compares to another. In relatively poor countries, many people grow their own food on small farms and may make their own tools and clothes. In these instances, the official gdp measure may be missing a significant percentage of real production. Gdp measures as the sum of the domestic value-added in all sectors of the economy but economic production also involves some loss of value. Example: electric company causes air pollution by burning coal-the electricity generated ends up being counted in gdp (household paid for electricity), but it"s also negative externalities.

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