National Income Aggregates
GDPmp =
Value of output of all sectors-Intermediate consumption
GDPmp called ‘gross’ and ‘at market price’ because
GDPmp is final products valued at market
price.It is called gross because no provision has been made for depreciation.
TIPS- Before
understanding National Income Aggregates we must understand and distinguish –
1-Market price
V/S Factor price-
- Market price is the price at which the commodity is sold and purchased in the market. It is equal to factor cost plus net indirect taxes. Therefore there is difference between market price and factor cost in the form of NIT.
- Factor Cost -[Land (rent ),Labor (wages),Enterprise (profit) and Capital (interest)]-Factor cost refers to the payment made by the firm to the factors of production for productivity services.
NIT- Net
Indirect Taxes=Indirect Taxes -Subsidies
- Indirect Taxes = Taxes which are levied by the GOVT on production and sales of commodities are indirect taxes eg. V.A.T ,excise duty ,entertainment tax etc.
- Subsidies = Cash grants given by the GOVT to the enterprises to encourage production of certain commodities or to promote exports or to sell goods at lower price.
- NIT =INDIRECT TAXES -SUBSIDIES
- MP = FC + NIT
- MP = FC + INDIRECT TAXES -SUBSIDIES
- FC = MP- NIT
