Use app×
Join Bloom Tuition
One on One Online Tuition
JEE MAIN 2025 Foundation Course
NEET 2025 Foundation Course
CLASS 12 FOUNDATION COURSE
CLASS 10 FOUNDATION COURSE
CLASS 9 FOUNDATION COURSE
CLASS 8 FOUNDATION COURSE
0 votes
1.1k views
in Economics by (25 points)

Please log in or register to answer this question.

1 Answer

0 votes
by (70.7k points)

NNP at Market Price and National Income at Factor Cost. The phrase at factor cost is to be contrasted with the phrase at market prices. Goods produced are sold at market prices which include the indirect taxes imposed by the Government.

The phrase at factor cost is to be contrasted with the phrase at market prices. Goods produced are sold at market prices which include the indirect taxes imposed by the Government. Indirect taxes are levied on commodities, such as excise duty on beer and cloth etc.

For example, suppose a manufacturer produced a product and the cost of production t is INR 100, which is given to different factors of production as wages, rents, interest and profits. The Government declared a subsidy of INR 5 rupee per product.After production the govt imposed indirect taxes worth INR 25 on this output 

Now the market price of the product = 100 + 25 – 5 = 120 

The 5 rupees subsidy will go to the manufacturer/factor of production. 

now the manufacturer gets = 100 + 5 = 105 which will be goes to different factors of production. 

so to go from market cost to factor cost 

factor cost = market cost-indirect tax+subsidy = 120 – 125 + 5 = 100

Welcome to Sarthaks eConnect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries. Students (upto class 10+2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains+Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.

Categories

...