Discuss with your teacher how you could calculate the
total value of a good or service by using the method of
value added at each stage.
Answers
Answer:
more intuitive way to avoid double counting the value of intermediate goods in gross domestic product is to, rather than try to isolate only final goods and services, look at the value added for each good and service (intermediate or not) produced in an economy. Value added is simply the difference between the cost of inputs to production and the price of output at any particular stage in the overall production process.
In the simple orange juice production process, described again above, final orange juice is delivered to the consumer via four different producers: the farmer who grows the oranges, the manufacturer who takes the oranges and makes orange juice, the distributor who takes the orange juice and puts it on store shelves, and the grocery store that gets the juice into the hands (or mouth) of the consumer. At each stage, there is a positive value added, since each producer in the supply chain is able to create output that has a higher market value than its inputs to production.
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The Value-Added Approach to Calculating Gross Domestic Product
Value-Added-GDP activity, cost of inputs, out puts and value added
The total value added at all stages of production is what is then counted in gross domestic product, assuming of course that all stages occurred within the economy's borders rather than in other economies. Note that the total value added is, in fact, equal to the market value of the final good produced, namely the $3.50 carton of orange juice.
Mathematically, this total is equal to the value of the final output as long as the value chain goes all the way back to the first stage of production, where the value of the inputs to production is equal to zero. (This is because, as you can see above, the value of the output at a given stage of production is, by definition, equal to the value of the input at the next stage of production.)
Explanation:
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Answer:
Answer:
The total value of the good or service can be calculated from the cost of manufacture to the cost of the delivery process.
Explanation:
● The total value of a good or service initially
starts from the cost of manufacturing.
● The manufacturing process involves the
buying of the raw materials and the cost of
the selection of the best raw materials for
the industry.
● In addition to this, the cost of production
process involves the producing of a
complete product until its finishing points.
● Lastly, the delivery process includes final
packaging and the cost of selling of the
products to the customers.
In this way, at each stage, the cost is
added.
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