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Product Method/ Value Added Method- 2
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This lesson deals with part 2 of Product method, with discussions on inventory and investment

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

Unacademy user
Ma'am can you please once again explain Accumulated and Decumulated Inventory, I am not getting it.
  1. Value added of a firm Value of production of firm- value of intermediate goods used by the firm Gross Value Added = Value added (including Depreciation) ( consumption of fixed capital / replacement investment) Net Value Added = Gross Value Added-Depreciation( doesn't include wear and tear of capital } Example: o Value of production of a good by firm Rs 100 (per year) o Value of Intermediate goods used during that year Rs 20 o Value of Capital Consumption Rs 10 o Gross Value Added- Rs 100- Rs 20 Rs 80 per year o Net Value added Rs 100- Rs 20- Rs 10 Rs 70 per year

  2. Inventory- stock of unsold finished goods, or semi finished goods, or raw materials carried by a firm from one year to the next stock variable either accumulated (higher value at end of year) or decumulated ( higher value at beginning of year) Change of inventories of a firm during a year production of firm during the year - sale of firm during the year Example o Beginning of year-> Unsold stock with firm : worth Rs 100 oDuring the year-> Production of goods (worth Rs 1000); selling of goods ( worth Rs 800) o Difference between production and sales Rs 200 (Change in Inventories) o Inventories at the end of year Rs 100+ Rs 200 Rs 300

  3. Change in Inventories takes place over a period of time - Flow variable May be planned or unplanned Investment- Addition to the stock of capital of a firm Three major categories: o Rise in value of inventories of a firm over a year ( investment expenditure) o Fixed Business Investment- Addition to machinery, factory buildings & equipments employed by firms o Residential Investment- Addition of housing facilities