Question

Intelligence Incorporated produces 100 computer chips and sells them for $300 each to Bell Computers. Using the chips and other labor and materials, Bell produces 100 personal computers. Bell sells the computers, bundled with software that Bell licenses from Macrosoft at $50 per computer, to PC Charlie’s for $800 each. PC Charlie’s sells the computers to the public for $1,000 each. Calculate the total contribution to GDP using the value-added method.

Answer 1

Answer -

Here,

Intelligence Incorporated Produces 100 computer chips and sells them for $300 each to Bell Computers

100 * $300 = $30000 ---------------- Activity (1)

Using the chips and other labor and materials, Bell produces 100 personal computers. Bell sells the computers, bundled with software that Bell licenses from Macrosoft at $50 per computer.

100 * $50 = $5000

Then total cost of computers

$30000 (Cost of chips) + $5000 (Cost of software) = $35000

Note - Cost of labor and other materials are not given

Bell sells the computers to PC Charlie’s for $800 each

Assuming Bell sell all computers to PC Charlie's

100 * $800 = $80000 ---------------- Activity (2)

PC Charlie’s sells the computers to the public for $1,000 each

100 * $1000 = $100000 --------------- Activity (3)

Total contribution to GDP using the value-added method

Activity	Cost of input	Price of output	Value added
(1)	$0	$30000	$30000
(2)	$35000 (30000 + 5000)	$80000	$45000
(3)	$80000	$100000	$20000
Total contribution to GDP			$95000