Question

Exercise 2:

i. Why is the Value-Added Method used as an alternative method to calculate GDP?

ii. What is the difference in computing the value of public service and private good?

Answer 1

I. GDP means the gross domestic product produced in a country in a financial year.We can say it is monetary measurement of all the goods produced in a country.

Value added method used to calculate how much value is added in a goods or services in different phases of production.value added method is an alternative method to calculate gdp because in value added method we calculated the value added in each production process.

Formula - gross output - intermediate consumption - depreciation - net indirect tax

Hence when we used valued added method then it is easier to get to know how much quantity is added at each stage of production's circular flow.

(II)Public service and goods are for the welfare of public and this is a facility given to the public for free of cost .hence public goods are for everyone.public goods are manufacture according to the requirement of country.There is no baises ness regarding rich and poor .both are equal in the eyes of law.

While private goods are only for the consumption of those who purchase it.it does not belong to everyone, its cost is also high.private goods are manufacture according to the customer's demand and need point of view.private good are made according to the requirement of rich person.