Comparing National Accounting Methods for Technology Goods
Two countries, A and B, report data on their smartphone industries. Analyze the two scenarios below and determine which country's statistical agency provides a more accurate measure of the change in real economic output. Justify your reasoning.
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An economy produces only one product: a smartphone. In Year 1, it sells 1 million units for $500 each. In Year 2, it sells 1 million units for $520 each. The smartphones produced in Year 2 are substantially more powerful and have more features than the ones from Year 1. If a statistician calculates economic growth by looking only at the total revenue change and does not adjust for the quality improvements, what will be the most likely outcome for the economic data?
Assessing Economic Output with Quality Changes
Comparing National Accounting Methods for Technology Goods
An economist observes that the average selling price of a new mobile phone was $600 in both Year 1 and Year 2. Based on this information alone, the economist concludes that the mobile phone sector made no contribution to the change in the nation's real economic output between the two years. This conclusion is correct.