2.1.1 - Economic Growth - National Happiness

Question 1

Can national income be a measure of happiness and standard of living?

Answer 1

Yes

Question 2

Explain the Easterlin Paradox

Answer 2

.Happiness and income are positively related at low levels of income but higher levels of income are not associated with increases in happiness.

. Increase in consumption of material goods will improve well-being when basic needs are not being met (e.g. food and water). But when these are being met, then increasing the quantity of goods consumed makes no different to well-being

. E.g. Having a new car when you already have a functioning car has increase in your well-being and happiness in the long term.

. Using this theory in the UK, it means that average levels of happiness in the UK, which is already high will not increase if GDP doubles.

Question 3

Explain another theory about happiness and income

Answer 3

. Some surveys suggest a positive correlation between relative income and happiness. Those with above average income tend to have higher levels of happiness than those with below average income.

. This mean if income for everyone in the UK was doubled, there would be no increase in happiness.

. But if an individual worker got their pay doubled, they would be happier as their income relative to everyone has increased

. If a person owns something (e.g. TV) that the majority of the population doesn’t their happiness also increases

. An explanation for this is that income is a symbol of social status and higher social status means higher happiness

. Another explanation is that those with above average income have higher life expectancy and health

Question 4

Define relative income

Answer 4

One’s income in relation to other people’s income