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Expenditure method
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This lesson discusses about the Expenditure Method of calculating national income.

Arpita Prakash
NCERTs series initiator at Unacademy 'Educator of the Month' for Feb'19 CBSE 0.1% Merit Certificate holder in Mathematics

U
Unacademy user
useful lecture.thank you sir.
Hanumant Hande
a year ago
वेलकम अँड तुमच्या पाठिंब्याबद्दल खूप आभार
L
ma'am if the farmer had sold worth 25 rs of his output (wheat) then the aggregate value of output of economy would have been 200+25=225 or 200+75=275 ?!
Yb
Yukar bitu
a month ago
what do u want to know?
Mam there is an error, i think the aggregate value of output of economy will be 200 only, as final expenditure of baker already includes 50 rupees of farmer raw material, so it will be 150+50=200
G
Gaurav
4 months ago
Hello, Let me attempt to clarify your doubt, in the expenditure method you have to think about the good & services sold to the households (from the concept of circular flow of income) if not expenditures performed by the households which in case of a circular flow of income model (simplified) are equal. Here, the farmer had sold wheat worth Rs. 50 the baker as intermediate goods which the baker has used to produce the final consumption good worth Rs. 200 which he sold to the household, so the total value of goods sold is 200+50 = Rs. 250, this must be the exact expenditure by the household, Hope it helps
  1. EXPENDITURE METHOD Looking at demand side of the products Addition of final expenditures that each firm makes Final expenditure->part of expenditure undertaken not for intermediate purposes Eg : Rs 50 worth of wheat(intermediate goods) not falling under the category of final expenditure . Aggregate value of output of economy Rs 200 (FE received by baker) Rs 50 (FE received by farmer) Rs 250 per year Following are the counts on which Firm X' can make the final expenditure : C Final Consumption Expenditure on the goods and services provided by the firm ( mostly undertaken by the households) o Final Investment Expenditure, incurred by other firms on capital goods produced by firm Investment goods remain with the firm, whereas intermediate goods are consumed in process of production o G-Expenditure that the government makes on final goods and services produced by firm (both consumption and investment expenditure) o X Export revenues earned by firms by selling goods and services abroad R-Sum total of revenues earned by firm X RV C+1+G+X


  2. Farmer Baker 100 Total production Intermediate goods used 0 Value added 200 50 200-50 = 150 100