(i) Suppose, there are only three firms in a hypothetical economy, viz. A, B and C. During a given period of time, the following transactions were undertaken by them : (I) Firm A sold goods worth Rs. 2,000 to Firm B and Rs. 1,200 to Firm C. (II) Firm B sold goods worth Rs. 1,100 to Firm A and Rs. 3,500 to Firm C. (III) Firm C sold to households for final consumption, goods worth Rs. 5,700. Estimate the value of Net Domestic Product at Market Price (NDP_MP), assuming depreciation to be Rs. 120. (ii) Explain the likely impact of construction of 2000 new schools providing high-quality education in a nation on Gross Domestic Product and Welfare in an economy. (i) "All consumption goods are durable in nature." Defend or refute the given statement with a valid argument. (ii) On the basis of the given data, estimate the value of National Income (NNP_FC) :

Question

Accepted Answer

Three-firm economy calculation:

Given transactions:
(I) Firm A sold goods worth Rs. 30,000 to Firm B
(II) Firm B sold goods worth Rs. 50,000 to Firm C
(III) Firm C sold goods worth Rs. 80,000 to final consumers

Value Added Method:
- Firm A: Value Added = Rs. 30,000
- Firm B: Value Added = 50,000 - 30,000 = Rs. 20,000
- Firm C: Value Added = 80,000 - 50,000 = Rs. 30,000

Total Value Added = 30,000 + 20,000 + 30,000 = Rs. 80,000

GDP = Rs. 80,000 (= value of final output).