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Aggregates related to national income - Market price and factor cost
राष्ट्रीय आय से संबंधित समुच्चय: बाजार मूल्य और साधन लागत
In this Class 12 Economics topic from National Income and Related Aggregates, students learn how national income measures are expressed at market price and factor cost. The topic explains the role of net indirect taxes, including indirect taxes and subsidies, in converting one valuation to the other. Students also connect these concepts with aggregates such as GDP, NDP, GNP and NNP, helping them interpret national income data and apply the relevant relationships in numerical questions.
TOPIC PRACTICE
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Hard · Level 5View options
₹400 crore
Negative ₹400 crore
₹380 crore
Negative ₹380 crore
Hard · Level 5View options
₹4,000 crore
₹4,250 crore
₹4,500 crore
₹4,950 crore
Hard · Level 5View options
₹600 crore
Negative ₹600 crore
₹525 crore
Negative ₹525 crore
Hard · Level 5View options
Market price will be ₹155 crore lower than factor cost
Market price will be ₹25 crore lower than factor cost
Market price will be ₹25 crore higher than factor cost
Both will be equal
Hard · Level 5View options
₹450 crore
₹540 crore
₹600 crore
₹750 crore
Hard · Level 5View options
₹500 crore
₹600 crore
₹720 crore
₹864 crore
Hard · Level 5View options
₹3,750 crore
₹4,000 crore
₹4,250 crore
₹6,250 crore
Hard · Level 5View options
₹3,600 crore
₹4,000 crore
₹4,500 crore
₹5,062.5 crore
Hard · Level 5View options
₹6,720 crore
₹6,900 crore
₹7,080 crore
₹7,680 crore
Hard · Level 5View options
About 4.0 percent
About 5.4 percent
About 6.0 percent
About 30.0 percent
Question 1HardLevel 5
If the ratio of factor cost to market price is 19:18 and market price is ₹7,200 crore, what are net indirect taxes?
Correct answer: B
The governing relation is Market Price = Factor Cost + Net Indirect Taxes, so NIT = MP − FC. Since FC:MP = 19:18, factor cost is 7,200 × 19/18 = ₹7,600 crore. Therefore, NIT = 7,200 − 7,600 = −₹400 crore. The negative sign means subsidies exceed indirect taxes. Thus option B is correct; option A ignores the sign, while ₹380 crore results from an incorrect ratio calculation.
If net indirect taxes are 2/9 of factor cost and market price is ₹5,500 crore, what is factor cost?
Correct answer: C
Use Market Price = Factor Cost + Net Indirect Taxes. Let factor cost be x. Since NIT = 2x/9, 5,500 = x + 2x/9 = 11x/9. Thus x = 5,500 × 9/11 = ₹4,500 crore. Option C is correct. The other options do not satisfy the equation: adding 2/9 of each proposed factor cost must give exactly ₹5,500 crore, which only happens for ₹4,500 crore.
Market price is 7/8 of factor cost and market price is ₹4,200 crore. What are net indirect taxes?
Correct answer: B
First find factor cost from MP = 7/8 of FC. Thus FC = 4,200 × 8/7 = ₹4,800 crore. Using NIT = MP − FC, NIT = 4,200 − 4,800 = −₹600 crore. The negative value indicates that subsidies exceed indirect taxes. Therefore option B is correct. Option A has the wrong sign, while options C and D use an incorrect difference or ratio.
Initially factor cost exceeded market price by ₹90 crore. Later net indirect taxes increased by ₹65 crore. What will be the new relation?
Correct answer: B
Since NIT = market price − factor cost, the initial excess of factor cost by ₹90 crore means NIT was −₹90 crore. An increase of ₹65 crore changes NIT to −90 + 65 = −₹25 crore. Thus market price remains ₹25 crore below factor cost. Option B is correct; it is not ₹155 crore because the increase reduces the gap, and it does not reverse the relationship completely.
If output at market price is ₹9,000 crore and, after a 25% fall in net indirect taxes, factor cost becomes ₹8,550 crore, what were net indirect taxes before the fall?
Correct answer: C
Use MP = FC + NIT, so the reduced net indirect taxes equal ₹9,000 − ₹8,550 = ₹450 crore. A 25% fall leaves 75% of the original amount. Therefore, 0.75 × original NIT = ₹450 crore, giving original NIT = ₹450 ÷ 0.75 = ₹600 crore. Option A is only the post-fall amount, while the other values do not satisfy the 25% reduction condition.
Factor cost is ₹6,400 crore. After a 20% rise in net indirect taxes, market price becomes ₹7,120 crore. What were net indirect taxes before the rise?
Correct answer: B
The governing relation is MP = FC + NIT. After the rise, NIT = ₹7,120 − ₹6,400 = ₹720 crore. This is 120% of the original tax because the tax rose by 20%. Hence original NIT = ₹720 ÷ 1.20 = ₹600 crore. Option C is the post-rise amount, not the original amount; the other choices do not reverse the 20% increase correctly.
If factor cost is x and net indirect taxes are 25% of factor cost, while market price is ₹5,000 crore, what is the value of x?
Correct answer: B
The governing equation is MP = FC + NIT. Since FC = x and NIT = 25% of x, market price = x + 0.25x = 1.25x. Thus, 1.25x = ₹5,000 crore, so x = ₹5,000 ÷ 1.25 = ₹4,000 crore. Option B is correct. A value of ₹3,750 crore would produce a market price of only ₹4,687.5 crore, not ₹5,000 crore.
If market price is x and net indirect taxes are negative 12.5% of market price, while factor cost is ₹4,500 crore, what is the market price?
Correct answer: B
Use FC = MP − NIT. Since NIT is negative 12.5% of MP, NIT = −0.125x. Therefore, ₹4,500 = x − (−0.125x) = 1.125x. Solving gives x = ₹4,500 ÷ 1.125 = ₹4,000 crore. The negative net tax raises factor cost above market price, which is why the multiplier is 1.125. Hence option B is correct.
GDP at market price is ₹7,500 crore. Depreciation is ₹600 crore and net indirect taxes are negative ₹180 crore. What is NDP at factor cost?
Correct answer: C
First remove depreciation: NDP at market price = ₹7,500 − ₹600 = ₹6,900 crore. The conversion rule is NDP at factor cost = NDP at market price − net indirect taxes. Because net indirect taxes are negative ₹180 crore, subtracting them means adding ₹180 crore: ₹6,900 − (−₹180) = ₹7,080 crore. Therefore C is correct; treating the negative figure as positive would incorrectly produce ₹6,720 crore.
An economy's nominal GDP rose by 18 percent and real GDP rose by 12 percent. Select the closest exact increase in the price level.
Correct answer: B
Because nominal GDP equals the price index multiplied by real GDP, the price-level factor is the nominal-growth factor divided by the real-growth factor. Thus it is 1.18 ÷ 1.12 = 1.053571 approximately. The implied price increase is 1.053571 − 1 = 0.053571, or about 5.4 percent. Directly subtracting 12 from 18 gives only a rough estimate and is not exact.
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