Question

In a hypothetical economy, only the following transactions take place. firm M sells all of

its product worth Rs. 12000 crores to firm N. Firm N sells its entire products to firm R for Rs.

19500 crores. Firm R sells his goods for final demand at Rs 27600 crore.

Now calculate the followings:

a) Value added by each firm.

b) An indirect tax of 12% is levied on N's product. the burden of this tax is shifted to

consumer. determine the market price of the goods for each firm.

c) A subsidy of Rs. 75 crores are given to firm M. As a result, it reduced the price of its

product. Determine the market price of output for all three firms. ​

Answer 1

Answer:

) A subsidy of Rs. 75 crores are given to firm M. As a result, it reduced the price of its

product. Determine the market price of output for all three firms.