Calculate the GDP for this economy in the three different approaches?

Question

Suppose a farmer produces 200kg strawberries, using only his own labour, seed and fertilizer on a smallholding which he rents. He sells the strawberries to a jam maker for R2 000 and pays R700 rent to the owner of the land. His net income is or profit is therefore R1 300.

The jam maker uses the strawberries to produce 50o jars of strawberry jam, which he sells to a baker for R5 000. His production costs are R1 500 for labour and R800 for overheads, which leaves a profit of R700.

The baker produces various cakes with the strawberry jam which he sells directly to the final consumers for R10 000. His labour costs are R1 000, his overheads amount to R1 000, which leaves a profit of R3 000

? · Accepted Answer

all lead to 10000. good for economics. no confusion.
 note :- in expenditure , take 10000 as export.

? · Answer

I object to the expression "profit" here. What remains after all expenses of a private business are covered are actually wages. It may be that when taken in more detail some of this remaining income is used to cover other expenses like rent of buildings and utilities and depreciation of equipment.

Gross Domestic product does not include manufacturing expenses. So the GDP is R2,000 + R5,000 + R10,000 = R17,000

ect5150 · Answer

The numbers are coming up weird on my browser.. are the Rs supposed to be $ signs?

Anyways, the 3 general ways to calculate GDP are these:

Expenditure Approach:
GDP = C + I + G + NX

Income Approach (aka Factor Payment Approach)
GDP = Rents + Wages + Profits + Interests

Value Added Approach
GDP = Sum of the additional value added in each stage of the productive process

Trending News

Calculate the GDP for this economy in the three different approaches?

3 Answers