Value Added Method

Date : 4.April. 2020
Sub : Economics
Class : 12
Period : 5
Day   : 3
Time  : 10:45am -11:25am


Learning Outcomes

• Computation of National Income through Value Added Method
• Meaning of Gross Value Added
• Production of goods are done in all 3 sectors of an economy
• Conversion of various items that have to be done

A very good morning students.

Today we are going to learn to calculate the National Income through the Value Added method.

National Income can be calculated by 3 methods:

• Value Added Method also called Output Method
• Income method
• Expenditure Method

All 3 methods will give the same National Income ie same answer.

Let us look at the 1st method which is the Value Added Method

Although i have sent a video link to you, i would still like to explain a few things.

Value Added = Value of Output - Intermediate Consumption

Value Added means the Gross Value Added at market Price (GVAmp)

Value Of Output = Sales + Change in Stock

Please remember Sales is Domestic sales ,International sales (Exports) and also Production for self consumption.( The video does not talk about Production for self Consumption but that has to be taken into consideration)

Change in Stock = Closing Stock - Opening Stock ( It will be given to you in the question.

Intermediate Consumption is the Raw Material used in the Production of makinf the Final Good.

Please remember GVAmp= GDPmp

Once we have calculated the GVAmp or GDPmp we can move forward to calculate the National Income

Ntional Income = NNPfc which is Net National Product at Factor Cost

There are 3 golden rules that i have 

• To convert Gross to Net just subtract Depreciation
• To convert Market Price to Factor Cost substract Net Indirect Tax
• To convert Domestic to National Add Net Factor Income From Abroad

I now invite you to watch the video link very carefully.

https://www.youtube.com/watch?v=pln20pNeUhw


For you assignment i request you to refer to the text book Sandeep Garg page number 4.31, 4.32,till page 4.34.You are reqired to do the 1st six sums .They have provided you the working the sums.