ECON 313 Final: Study Guide
24 Jan 2019
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Concept of value added " = revenue - cost of intermediate good. Value added" is also known as the income to factors of production. Maybe official exchange rates, only valid for int"l exchanged goods. Law of 1 price" = goods exchanged int"l must have roughly the same price. Domestic goods may be cheaper @ developing countries b/c lower cost of living. Account for cost of living by collecting data on 150+ categories of goods/services constructing int"l prices". We should always want to use ppp measures. Means to attain basic needs @ low income. Capabilities = ways to convert commodities into functionings (education, health) Gdp is inadequate for developing countries b/c of the informal sector (black markets) high inequality gdp shared back to the poor. When poor, $ enables you to survive decreasing returns to income. Calculated income needed to get 2000 calories = poverty line. But food only expense (education, housing, etc. ) The goal should be to raise living standards.
