Question

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: \[ \text{(I) Firm A sold goods worth ₹2,000 to Firm B and ₹1,200 to Firm C.} \\ \text{(II) Firm B sold goods worth ₹1,100 to Firm A and ₹3,500 to Firm C.} \\ \text{(III) Firm C sold to households for final consumption, goods worth ₹5,700.} \] Estimate the value of Net Domestic Product at Market Price (NDP_MP), assuming depreciation to be ₹120.

Hint:

To calculate NDP\textsubscript{MP}, add up the transactions in the economy and subtract depreciation.

Answer 1

To calculate Net Domestic Product at Market Price (NDP_MP), we follow these steps:
1. Calculate Gross Domestic Product (GDP_MP) at Market Price: 
GDP_MP is calculated by adding all transactions in the economy. The formula is: \[ \text{GDP} = \text{Value of Sales to Households} + \text{Intermediate Sales between Firms} \] The total value of sales to households = ₹5,700. 
The intermediate transactions (sales between firms) = ₹2,000 (Firm A to Firm B) + ₹1,200 (Firm A to Firm C) + ₹1,100 (Firm B to Firm A) + ₹3,500 (Firm B to Firm C) = ₹7,800. 
Therefore, GDP_MP = ₹5,700 + ₹7,800 = ₹13,500. 
2. Subtract Depreciation: 
To find the Net Domestic Product (NDP_MP), we subtract depreciation from GDP_MP. NDP = GDP_MP - Depreciation  
NDP_MP = ₹13,500 - ₹120 = ₹13,380  
Thus, the Net Domestic Product at Market Price (NDP_MP) is ₹13,380 crore.