In 2015, John Buys a Factory Built in 2009 and Constructs

question 84

Essay

In 2015, John buys a factory built in 2009 and constructs a new storage house within the premises. The transaction of buying the factory is not counted in the GDP, but the construction of the storage house in the same factory is counted in GDP. Why?

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of the consumer increases, opposite to normal goods.

Income Elasticity

A measure of how much the quantity demanded of a good responds to a change in consumers' income, holding all other factors constant.

Expenditures Decline

A situation where there is a reduction in spending by individuals, businesses, or governments.

Elastic Demand

A condition where the demand for a product is significantly responsive to changes in its price.