Explain the value added method of computing national income
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Value Added Method for Measurement of National Income!
This method is used to measure national income in different phases of production in the circular flow. It shows the contribution (value added) of each producing unit in the production process.
i. Every individual enterprise adds certain value to the products, which it purchases from some other firm as intermediate goods.
ii. When value added by each and every individual firm is summed up, we get the value of national income.
Value added Method is also known as:
(I) Product Method;
(ii) Inventory Method;
(iii) Net Output Method;
(iv) Industrial Origin Method; and
(v) Commodity Service Method.
Concept of Value Added:
Value added refers to the addition of value to the raw material (intermediate goods) by a firm, by virtue of its productive activities. It is the contribution of an enterprise to the current flow of goods and services. It is calculated as the difference between value of output and value of intermediate consumption.
Value Added = Value of Output – Intermediate ConsumpTion.
Hope it help u.
Value Added Method for Measurement of National Income!
This method is used to measure national income in different phases of production in the circular flow. It shows the contribution (value added) of each producing unit in the production process.
i. Every individual enterprise adds certain value to the products, which it purchases from some other firm as intermediate goods.
ii. When value added by each and every individual firm is summed up, we get the value of national income.
Value added Method is also known as:
(I) Product Method;
(ii) Inventory Method;
(iii) Net Output Method;
(iv) Industrial Origin Method; and
(v) Commodity Service Method.
Concept of Value Added:
Value added refers to the addition of value to the raw material (intermediate goods) by a firm, by virtue of its productive activities. It is the contribution of an enterprise to the current flow of goods and services. It is calculated as the difference between value of output and value of intermediate consumption.
Value Added = Value of Output – Intermediate ConsumpTion.
Hope it help u.
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