ECON 105 Chapter : Ch 20.docx

• School: Simon Fraser University
• Department: Economics
• Course: ECON 105
• Professor: Seong- Jun Choi

Document Summary

Double counting or multiple counting : the error that would arise in estimating the nation"s output by adding all sales of all firms in general, it is extremely difficult if not impossible to successfully distinguish final from intermediate goods value added: the value of a firm"s output minus the value of the inputs that it purchased from other firms value added = sales revenue cost of intermediate goods (purchased from other firms) value added = payments owed to the firm"s factors of production payments made to factors of production (wages, profit, rent, use of capital) are not purchases from other firms and hence are not subtracted from the firm"s revenue when computing value added value added is the correct measure of each firm"s contribution to total output the amount of market value that is produced by that firm the sum of all values added in an economy is a measure of the economy"s total output.