Question : Find net value added at factor cost if:
i) Durable use producer goods with a life span of 10 years 10
ii) Single-use producer goods 5
iii) Sales 20
iv) Unsold output produced during a year 2
v) Taxes on production 1
Choose the correct alternative
Option 1: 14
Option 2: 15
Option 3: 18
Option 4: 20
Correct Answer: 15
Solution : The correct answer is (b) 15
To calculate the net value added at factor cost, we need to consider the following components:
1. Durable use producer goods with a life span of 10 years: This implies that the value of the durable goods is spread over 10 years. Since the value is given as 10, the annual value added would be 10/10 = 1.
2. Single-use producer goods: The value added from single-use producer goods is given as 5.
3. Sales: The value added from sales is given as 20.
4. Unsold output produced during a year: The value added from unsold output is given as 2.
5. Taxes on production: 1
Net value added at factor cost = Sales + Unsold output - Single-use producer goods - Durable use producer goods- Taxes on production
Net value added at factor cost = 20 + 2 - 5 - 1 - 1 = 15
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