Match each stage of production in a cocoa-to-chocolate processing chain with its correct Net Value Added contribution to National Income based on the output method of measurement.
- Stage 1: Cocoa Farmer harvests raw cocoa beans and sells them to a processor for ₦120,000 (with zero intermediate costs).Net Value Added of ₦120,000
- Stage 2: Processor converts raw cocoa beans into cocoa butter and sells the output to a chocolate manufacturer for ₦270,000.Net Value Added of ₦150,000
- Stage 3: Manufacturer produces packaged chocolates using the cocoa butter and sells them to a distributor for ₦480,000.Net Value Added of ₦210,000
- Stage 4: Retailer purchases the packaged chocolates from the distributor for ₦480,000 and sells them to final consumers for ₦650,000.Net Value Added of ₦170,000
Answer
Stage 1 matches Net Value Added of ₦120,000; Stage 2 matches Net Value Added of ₦150,000; Stage 3 matches Net Value Added of ₦210,000; Stage 4 matches Net Value Added of ₦170,000.
The output (value added) method measures national income by summing the net incremental value created at each stage of production. For each stage, Value Added = Gross Value of Output minus Cost of Intermediate Inputs. This ensures intermediate goods are counted only once and eliminates double counting.
Step-by-Step Solution
Key Concept
Output (Value Added) Method of Measurement