The table below presents the market transactions across three stages in the production of wooden furniture:
| Stage of Production | Output Value (₦) | Cost of Intermediate Inputs (₦) |
|---|---|---|
| Logging | 40,000 | 0 |
| Sawmilling | 75,000 | 40,000 |
| Furniture Manufacturing | 130,000 | 75,000 |
What is the total net contribution of this production chain to Gross Domestic Product (GDP) using the output method?
- ₦130,000Answer
- B₦245,000
- C₦115,000
- D₦90,000
Answer
The total net contribution to Gross Domestic Product (GDP) is ₦130,000.
Under the output (value added) method of national income accounting, contribution to GDP is determined by summing the value added at each stage of production. Value added is equal to gross output value minus intermediate input costs: Logging adds ₦40,000, Sawmilling adds ₦35,000 (₦75,000 - ₦40,000), and Furniture Manufacturing adds ₦55,000 (₦130,000 - ₦75,000). Total contribution to GDP is ₦40,000 + ₦35,000 + ₦55,000 = ₦130,000, which also corresponds directly to the final sale value of the consumer product.
Step-by-Step Solution
Key Concept
Output (Value Added) Method of Measurement
Estimated Time:1m 30s