BOUT ME .Graduation in Computer Engineering from Panjab University, Chandigarh. . Post-graduation in Business Administration from Panjab University, Chandigarh . Cleared UPSC Preliminary Examination thrice .Appeared for UPSC interview. . Working at Career Launcher. .Follow me at http://unacademy.in/user/goyalsamridhi02
CONCEPT OF "NET" In the process of producing goods Machinery/Equipment installed to produce in the previous period gradually wears out.(General wear and lear) Hence this general wear and tear is also a hidden expense which we did NOT consider while in our factors of production(Land, Labour, Capital and Enterprise) >This general wear and tear can be termed as Depreciation.
13 CONCEPT OF "NET GDP is an index that does not consider Depreciation into account. GDP takes into account newly produced capital goods but does not take account of capital goods "consumed" in the production process. Hence it does not give us the true picture of the real production of an economy.
GROSS v/s NET Gross means total value of products received from the buyer Example: If I buy a mobile phone and pay Rs10,000. This value is gross value. Net value is what is received by phone manufacturer after deducting wear and tear (depreciation), VAT, and other taxes Finally manufacturer receives Rs7860 after deducting all these expenses. This value of 7860 is known as Net.
FORMULA Net Domestic Product is calculated as: >NDP=GDP-Depreciation.
FORMULA Net National Product can be calculated as follows: NNP GNP- Depreciation.
CONCEPT OF FACTOR COST >The actual incurred cost on goods and services that are produced by the firms and industries in an economy is known as Factor Cost. Simply speaking the factor cost is the sum of all the factors of production: Land , Labour, Capital and raw materials amongst many more that are used to produce a given quantity of output in an economy.
Example of "FACTOR COST Manufacture of a mobile: Total cost Rs 20,000 Raw material(Hardware Cost): Rs 10,000 Land (Rent) where the factory is located: Rs 1000 (proportionate) Labour(wages): Rs 2000(proportionate) - Capital(Interest): Rs2000(proportionate) Total cost: Rs 15000 Rest is manufacturer's Profit Margin and Taxes to be paid
CONCEPT OF "MARKET PRICE" The price at which goods are sold is known as the Market Price Tricky(No) Market Price will include the taxes levied on: manufacturing of product - Sale of product Market Price might also include Subsidies, if provided, by the Government.