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SubjectsEconomics
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
Up to 25 questions from this page. Select your focus, then start.
For any identical aggregate, market price equals factor cost plus net indirect taxes. Applying this rule to net national product gives NNPMP = NNPFC + NIT. Depreciation is already accounted for because the measure is net. Option B subtracts NIT in the wrong direction, C reverses the conversion, and D substitutes GDP for NNP.
Net indirect taxes are defined as indirect taxes minus subsidies. The identity is market price = factor cost + net indirect taxes. If net indirect taxes equal zero, the adjustment disappears and market price equals factor cost. This does not require both taxes and subsidies to be zero; they may be equal. National income and depreciation are unrelated to this certainty.
Factor cost is the total remuneration paid to all factors of production. Wages reward labour, rent rewards land, interest rewards capital, and profit rewards entrepreneurship. Thus, factor cost = ₹250 + ₹60 + ₹45 + ₹75 = ₹430. Option B omits profit, while A and D do not represent the correct total. Therefore, option C is correct.
To convert factor cost into market price, add net indirect taxes. First calculate NIT = indirect tax − subsidy = ₹50 − ₹12 = ₹38. Then market price = factor cost + NIT = ₹430 + ₹38 = ₹468. Option D incorrectly adds the subsidy, B ignores taxes, and A subtracts the net adjustment. Hence option C is correct.
Net indirect taxes are defined as indirect taxes minus subsidies: NIT = indirect taxes − subsidies. Indirect taxes raise the price paid by buyers, while subsidies reduce it; therefore, the net adjustment is their difference. Direct taxes do not enter this particular conversion. Option C wrongly adds subsidies, and A and D use direct taxes.
Market-price to factor-cost conversion changes only the valuation basis. Net indirect taxes are deducted from market price, or added in reverse, while depreciation is not involved. Since gross and net status depends on depreciation, that status remains unchanged. A and B confuse two separate conversions, and D incorrectly changes the domestic-national classification.
The conversion between market price and factor cost adjusts only net indirect taxes. It changes how the value is expressed, not whether the production measure is domestic or national. Domestic and national status depends on the production boundary and net factor income from abroad, respectively. Therefore, the status remains unchanged; options A, B and D confuse unrelated classifications.
To convert market price into factor cost, subtract net indirect taxes: factor cost = market price − NIT. Thus, factor cost = ₹1,500 crore − ₹120 crore = ₹1,380 crore. The ₹90 crore depreciation is irrelevant because gross-to-net conversion, not market-price-to-factor-cost conversion, is being performed. Option B is therefore correct.
The governing relation is Market Price = Factor Cost + Net Indirect Taxes. Therefore, market price = ₹1,750 crore + ₹135 crore = ₹1,885 crore. Net factor income from abroad is used when converting a domestic aggregate into a national aggregate; it does not affect the conversion between factor cost and market price. Hence, option C is correct.
First calculate net indirect taxes: NIT = Indirect Taxes − Subsidies = ₹190 crore − ₹240 crore = −₹50 crore. The relation is Factor Cost = Market Price − NIT. Thus, factor-cost output = ₹2,600 − (−₹50) = ₹2,650 crore. A subsidy larger than tax makes NIT negative, so it increases factor cost relative to market price. Option D is correct.
The governing formula is GDP at factor cost = GDP at market price − Net Indirect Taxes. Substituting the given values gives ₹18,000 crore − ₹1,200 crore = ₹16,800 crore. Net indirect taxes are included in market prices but not in factor-cost valuation, so they must be deducted. Therefore, option B is correct; adding them would incorrectly produce option D.
To move from factor cost to market price, add net indirect taxes. Net indirect taxes = Indirect Taxes − Subsidies = ₹1,100 − ₹300 = ₹800 crore. Therefore, NDP at market price = ₹12,500 + ₹800 = ₹13,300 crore. Option C is correct. Subtracting the net tax or adding gross taxes without considering subsidies leads to the other alternatives.
The relationship is Net Indirect Taxes = Market Price − Factor Cost. If market price is ₹650 crore lower than factor cost, then MP − FC = −₹650 crore. Thus, net indirect taxes are negative ₹650 crore. This indicates that subsidies exceed indirect taxes by ₹650 crore. Therefore, option B is correct; a positive amount would reverse the stated relationship.
Net indirect taxes equal indirect taxes minus subsidies. Therefore, the change in NIT is the change in taxes minus the change in subsidies: ₹200 crore − ₹80 crore = ₹120 crore. Since the tax increase is larger, NIT rises by ₹120 crore. Option B is correct; adding both changes would ignore the subtractive role of subsidies.
First find net indirect taxes from the difference between market price and factor cost: NIT = ₹20,000 − ₹18,700 = ₹1,300 crore. Because NIT = Indirect Taxes − Subsidies, indirect taxes = NIT + Subsidies = ₹1,300 + ₹400 = ₹1,700 crore. Hence, option C is correct. The smaller figures fail to add subsidies back to net taxes.
Use NIT = Indirect Taxes − Subsidies. Rearranging gives Subsidies = Indirect Taxes − NIT. Substituting the values: Subsidies = ₹900 − (−₹150) = ₹1,050 crore. The negative NIT means subsidies exceed indirect taxes, which is consistent with ₹1,050 crore being greater than ₹900 crore. Therefore, option C is correct.
The governing relationship is GNP at market price = GNP at factor cost + net indirect taxes, because market prices include the tax component after adjusting for subsidies. Therefore, GNP at market price = ₹15,800 crore + ₹900 crore = ₹16,700 crore. Option C is correct. Option A subtracts taxes, while B ignores the adjustment and D adds an incorrect amount.
Net indirect taxes equal the difference between the market-price and factor-cost values. In the initial year, the difference was ₹10,000 − ₹9,200 = ₹800 crore. In the next year, it was ₹11,200 − ₹10,100 = ₹1,100 crore. The change was ₹1,100 − ₹800 = ₹300 crore increase. Hence option C is correct; comparing only market prices or only factor costs gives a wrong result.
The phrase “12 percent higher than factor cost” means the increase is calculated on ₹5,000 crore. The increase is 12/100 × ₹5,000 = ₹600 crore. Therefore, market price = ₹5,000 + ₹600 = ₹5,600 crore, or ₹5,000 × 1.12. Option C is correct. Option A uses an incorrect percentage amount, while B and D apply larger unjustified increases.
Because factor cost is stated to be 5 percent higher than the given market price, calculate 5% of ₹8,000 crore: 0.05 × ₹8,000 = ₹400 crore. Add this increase to the original amount: factor cost = ₹8,000 + ₹400 = ₹8,400 crore. Thus option C is correct. Option B ignores the increase, A subtracts it, and D applies a 10% increase instead of 5%.
The market-price and factor-cost relationship is market price = factor cost + net indirect taxes. Net indirect taxes are 8% of ₹15,000 crore, so they equal 0.08 × ₹15,000 = ₹1,200 crore. Therefore, factor cost = ₹15,000 − ₹1,200 = ₹13,800 crore. Option C is correct. The other options result from using an incorrect percentage or subtracting the wrong amount.
The governing relation is Market Price = Factor Cost + Net Indirect Taxes. Net indirect taxes equal 10% of ₹9,000 crore, which is ₹900 crore. Therefore, market price = ₹9,000 crore + ₹900 crore = ₹9,900 crore. Option B is correct. Option A adds only ₹100 crore, while Options C and D use incorrect percentage calculations.
Let subsidies be x crore. Since indirect taxes are three times subsidies, indirect taxes = 3x. Net indirect taxes equal indirect taxes minus subsidies, so 3x − x = 2x = ₹800 crore. Hence x = ₹400 crore. Option C is correct. The other options do not satisfy the equation because twice their value would not equal ₹800 crore.
Net indirect taxes are calculated as indirect taxes minus subsidies. Subsidies are 25% higher than ₹800 crore, so they equal ₹800 × 1.25 = ₹1,000 crore. Therefore, net indirect taxes = ₹800 crore − ₹1,000 crore = −₹200 crore. Option B is correct; the negative sign shows that subsidies exceed indirect taxes.
The gap between market price and factor cost equals net indirect taxes: MP − FC = indirect taxes − subsidies. If subsidies rise more than indirect taxes, net indirect taxes decrease. With other factors unchanged, market price therefore moves closer to factor cost, so the gap falls. Option B is correct; the size of the fall depends on the difference between the two increases.
QUIZ COMPLETE
