ECON 1P92 Lecture Notes - Black Market, Gdp Deflator, Gross Domestic Product

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2 Oct 2013

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ECON 1P92 Full Course Notes

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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 any other firms. Measures each firms contribution to total output. The amount of market value that is produced by that firm. Value added = revenue costs of intermediate goods & services. Steel company buys iron ore for . Produces steel that it sells for . Steel company"s value is - = . Total value added for a product = final selling price of the product or service. The shirt sells for , and sum of value added ( + +) equals . Also, value added = income to factors of production. Total value added in the economy is gross domestic product (gdp): Measure of all final output that is produces in the economy, value at market prices. Adding up value added avoids double counting.

Related Questions

Intermediate goods are goods and services that are purchased for resale or for further processing or manufacturing. Final goods are consumer goods, capital goods, and services that are purchased by their final users, rather than for resale or for further processing or manufacturing. Including the value of intermediate goods in the measure of real GDP would amount to multiple counting, and therefore distort the value of GDP. Value added is the market value of a firm’s output less the value of the inputs the firm has bought from others.

Using the table below, calculate the total sales values, value-added, and fill in the missing boxes. The product is assembled for sale is a fancy wool suit.

Stages of Production	Sales Value of Materials or Product	Value Added
	$0
Firm A: Sheep Ranch		$120
Firm B: Wool Processor	$180
Firm C: Suit Manufacturer	$220
Firm D: Clothing Wholesaler		$50
Firm E: Retail Clothier (Market)		$80
Total Sales Value
Total Value Added

amethysttrout886

Consider an economy in which the following activities occur during a given year: (Total 10 points)

A steel company pays its workers $95,000 to mine iron ore and process it into 1000 kilograms of steel.

A car manufacturer purchases the steel for $113 per kilogram and pays its workers $27,000 to produce 38 cars, which it sells to final consumers for $6,300 per car.

a) What is the value-added by each of these activities?

b) What is the sum of incomes earned in this economy?

c) What is the value of final goods produced in this economy?

d) What is GDP in this economy?

e) Suppose that in the next year, the quantities of steel and cars are the same, wages paid by both companies are the same, but the price of steel is now $128 per kilogram and the price of a car is $5,900. What is the nominal GDP in the next year? What is the growth rate of real GDP between the first year and the next?

carminewasp119

What is the market for factors of production?

What is the market for factors of production?
1. The market for factors of production is where households and firms interact to trade factors of production for factor payments. For example this is where people provide firms with labor and firms pay them with wages.
What is the money market?
1. The money market is where households, firms, and the government may save and/or invest their money to earn interests. Money market includes banks, stock market, bonds market, and other financial institutions where economic actors can buy and sell financial assets to earn interests and/or dividends.
Who are the three economic actors in the circular flow model?
1. In a circular flow model, the three main economic actors are the households, firms, and the government. Households include the typical individual consumers. Firms include businesses and similar producers in the economy. Finally, the government refers to the whole government system from federal to local level.
How is the national income of an economy determined?
1. The national income of an economy is determined by measuring the total value of the output produced in an economy or the total income earned by the actors in the economy. In a circular flow model, we can see that the value of total output produced should equal the total value of income generated and earned in the economy. This is because every dollar spent by someone in the economy is received by another person in the economy as income.
What is GDP?
1. The gross domestic product or GDP represents the sum total of the value of the final goods and services produced within the economy for a given year. It is the most commonly used measure of its economy’s productivity and income.

ECON 1P92 Lecture Notes - Black Market, Gdp Deflator, Gross Domestic Product

ECON 1P92 Full Course Notes

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