Reference no: EM133132711

This example raises another question as well. How do we decide if society in general is better or worse off after they start trading? We showed that the countries can get to new points beyond their PPF. They are more productive and richer. Does that necessarily mean they are better off? This is a hard question to answer in economics. It depends on your definition of how well off they are, and how you compare that between countries.Economists have a word for this idea of generally how well off a country or person is. They call it "welfare". You might have heard of programs like food stamps and Medicaid in the US being called welfare. That is a little different meaning of the word. When economists talk about the welfare of a society, they mean the general amount of happiness or "utility" that is felt in society. We would like to have a way to measure it, but that is a pretty vague idea-happiness. There is some debate about the best way to measure it.Historically, economists have used Gross Domestic Product to measure welfare. GDP, as it's called, measures how much a country produces and sells, measured in the dollar value of those sales. If we use GDP, we are saying that one country is better off than another country because they make more money selling what they produce. This is a very utilitarian approach to measuring welfare. Money is useful, because it allows us to buy more stuff. Find a chart on the internet that measures GDP across different countries, or in the same country over time. Then explain what you were able to learn from the chart.

Question-Copy a link to that image here and explain what we learn from the chart.