ECON 1P92 Lecture : chapter 20

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6 Mar 2012

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Many firms produce outputs that are used as inputs by other firms. Outputs of firms that are used as inputs by other firms. Outputs that are not used as inputs by other firms. Measures each firm"s contribution to total output. The amount of market value that is produced by that firm. Value added = revenue costs of intermediate goods and services. Produces steel that sells for : steel is the output. Steel company"s value added is - = . Total value added for a product equals final selling price of product. Shirt sells for , and sum of value added ( + + 15) equals . Also, value added = income to factors of production. Total value added in the economy is gdp: Three different ways of measuring national income: add up total value added from domestic production, add up the total expenditure on domestic output, add up the total income from domestic production.

Related Questions

The table below shows the price of inputs and the price of outputs at each step in the production process of making a shirt. Assume that each of these steps takes place within the country.

	Cotton farmer	Fabric maker	Sewing and printing
Inputs	$0	$1.10	$3.50
Value of output	$1.10	$3.50	$18.00

a. Using the standard expenditure method, the total contribution of this shirt to GDP is $_____.

b. If we use a value-added method (i.e., summing the value-added by producers at each step of the production process, equal to the price of inputs minus the price of outputs), the contribution of this shirt to GDP is $_____.

c. If we mistakenly added the price of both intermediate and final outputs without adjusting for value-added, we would find that this shirt contributes $_____ to GDP and this overestimates the true contribution by $_____.

The table below shows the price of inputs and the price of outputs at each step in the production process of making a shirt. Assume that each of these steps takes place within the country.

a. Using the standard expenditure method, the total contribution of this shirt to GDP is $_____.

graydeer810

There are three firms in an economy: A, B, and C. Firm A buys $250 worth of goods from firm B and $200 worth of goods from firm C and produces 200 units of output, which it sells at $5 per unit. Firm B buys $100 worth of goods from firm A and $150 worth of goods from firm C and produces 300 units of output, which it sells at $7 per unit. Firm C buys $50 worth of goods from firm A and nothing from firm B. It produces output worth $1,000. All other products are sold to consumers.

a. Bif, a tax on total value added of each firm (value-added tax) of 10 percent is introduced, how much revenue will the government get?

b. How much would the government get if it introduced a 10 percent income

tax?

c. How much would the government get if it introduced a 10 percent sales tax on

final output?

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ECON 1P92 Lecture : chapter 20

ECON 1P92 Full Course Notes

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