Question

Assume the production of a good involves four stages of production. If the final retail price of this good is $20, it must be the case that summing the "value added" for all stages of production will equal:

Answer 1

There will be Four stages in production of goods and services

1) Input : In this stage all the raw materials that are required of the production of goods and services will be extracted and taken care. Assume the cost as A in this stage

2) Processing stage: In this all the raw materials are used to prepare the product of the good which is the processing the stage. The goods we get here are semi finished goods. Assume the cost as B in this stage

3) Finished goods: All the semi finished goods after going under certain process and development they are converted into finisedf goods. Assume the cost in this stage is C .

4) Marketing : In this stage all the advertising and selling stratergies are prepared to make the good sale in the market. So the cost in this stage is D

Now the Final cost of good : A+B+ C+ D+ Profit + Taxes.

So after costs of all this stages and profit along with taxes are added to keep the final price of good.

This price is the market price.