Question

Briefly explain which part of GDP would have changed by how much for years 2018 and 2019 after the following event:​

2,000 copies of the new 6th edition of Krugman-Wells Macroeconomics were produced in October 2018. Each textbook is priced at $100. Since the new edition came out after the start of Autumn quarter, they were all sold after January 2019, during Winter quarter. However, since the 6th edition was not very different from the 5th edition, 20 students in ECON 202 in Winter 2019 ended up purchasing used books in 5th edition at $40 each.

Answer 1

Gross Domestic Product (GDP) the total market value of all final goods and services produced within the domestic territory of an economy during a specified period of time.

In the question, we are given that 2000 copies of Krugman-Wells Macroeconomics, priced at $ 100, were produced in October 2018 and sold out by January, 2019. So, the new edition generated $ 200000 in sales.

The GDP of 2019 will increase by $ 200000 and the transaction (sale of the new edition) will be recorded as consumption expenditure.

Also, the previous edition of the book, produced in some other FY, were resold for $ 800 in the Winter of 2019 (the Winter quarter of 2019 itself).

The GDP includes the value of only final goods and services produced during the current FY. As such, while calculating the GDP for the year 2019, the sale of second-hand books worth $ 800 will not be considered as these were produced in some other FY.

Note:

The duration of FY 2018 and FY 2019 is as follows:

FY 2018 began on 1st October, 2017 and ended on 30th September, 2018.

FY 2019 began on 1st October, 2018 and ended on 30th September, 2019.

As the FY 2018 ended on 30th September, 2018, the production of the new edition of the Macroeconomics book took place in the next FY, that is, FY 2019. So, the GDP of 2018 was unaffected by the transaction in our question.