The table below presents the transaction values across three stages of a agricultural-manufacturing production chain in an economy: | Stage of Production | Value of Output (\text{₦}) | Cost of Intermediate Inputs (\text{₦}) | | :--- | :--- | | Sugarcane Farming | 150,000 | 0 | | Sugar Refining | 280

The table below presents the transaction values across three stages of a agricultural-manu… — JAMB UTME

The table below presents the transaction values across three stages of a agricultural-manufacturing production chain in an economy:

Stage of Production	Value of Output ( $\text{₦}$ )	Cost of Intermediate Inputs ( $\text{₦}$ )
Sugarcane Farming	$150,000$	$0$
Sugar Refining	$280,000$	$150,000$
Confectionery Manufacturing	$450,000$	$280,000$

Using the output (value added) method of national income accounting, what is the total contribution of this production chain to the Gross Domestic Product (GDP)?

A
$\text{₦}880,000$
$\text{₦}450,000$ Answer
C
$\text{₦}430,000$
D
$\text{₦}300,000$

Answer

The total contribution of this production chain to GDP is

\text{₦}450,000

Under the output (value added) method of national income accounting, GDP contribution is computed by calculating the net value added at each production stage (Value of Output minus Cost of Intermediate Inputs) and summing them up. Sugarcane farming adds

\text{₦}150,000

, sugar refining adds

\text{₦}130,000

, and confectionery manufacturing adds

\text{₦}170,000

, giving a total net contribution of

\text{₦}450,000

. Alternatively, this equals the market value of the final consumer product (confectionery).

Step-by-Step Solution

Calculate the value added at each individual stage of production using the formula:

\text{Value Added} = \text{Value of Output} - \text{Cost of Intermediate Inputs}

Sugarcane Farming:

150,000 - 0 = \text{₦}150,000

; Sugar Refining:

280,000 - 150,000 = \text{₦}130,000

; Confectionery Manufacturing:

450,000 - 280,000 = \text{₦}170,000

The output method avoids double counting by isolating only the incremental value created at each stage.

Sum the net value added across all three stages to determine total GDP contribution.

Total GDP Contribution =

150,000 + 130,000 + 170,000 = \text{₦}450,000

National income is the aggregate of net value added by all productive units in the economy.

Key Concept

Output (Value Added) Method of Measurement

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