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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.
Using MP − FC = net indirect taxes, a positive value means market price is greater than factor cost. When net indirect taxes become negative, the difference MP − FC is negative, so factor cost becomes greater than market price. Thus the relationship reverses from MP > FC to MP < FC. Option A correctly describes this change.
For the same aggregate measured at two valuation bases, NDP at market price = NDP at factor cost + net indirect taxes. Hence net indirect taxes = ₹13,800 crore − ₹14,100 crore = −₹300 crore. The negative value means subsidies exceed indirect taxes. Option B is correct; depreciation and net factor income are unrelated to this difference.
Net indirect taxes equal GNP at market price minus GNP at factor cost: ₹16,500 − ₹15,600 = ₹900 crore. The question asks for this as a percentage of GNP at market price, so percentage = (₹900 ÷ ₹16,500) × 100 = approximately 5.45%. Option B is correct; using factor cost as the denominator would give a different, inappropriate percentage.
First calculate factor cost: 92% of ₹25,000 crore = 0.92 × ₹25,000 crore = ₹23,000 crore. Net indirect taxes equal market price minus factor cost, so NIT = ₹25,000 crore − ₹23,000 crore = ₹2,000 crore. Option C is correct. The remaining 8% of market price also gives 0.08 × ₹25,000 crore = ₹2,000 crore.
Calculate market price first: 96% of ₹12,500 crore = 0.96 × ₹12,500 crore = ₹12,000 crore. Net indirect taxes are market price minus factor cost, so NIT = ₹12,000 crore − ₹12,500 crore = −₹500 crore. Option B is correct. The negative value occurs because market price is lower than factor cost, indicating subsidies exceed indirect taxes.
Net indirect taxes are calculated as indirect taxes minus subsidies. A percentage change is always applied to its respective initial base, so the original tax and subsidy amounts are essential. If T and S are the initial amounts, the new net indirect tax is 1.20T − 0.80S. Therefore, percentages alone cannot determine the numerical effect, making option A correct; the other choices omit the required base values.
The governing relation is net indirect taxes = indirect taxes − subsidies. The new tax is ₹1,000 × 1.10 = ₹1,100 crore, while the new subsidy is ₹400 × 1.25 = ₹500 crore. Hence, new net indirect taxes equal ₹1,100 − ₹500 = ₹600 crore. Option A ignores the separate percentage changes, whereas ₹700 crore is only the original net amount.
The governing identity is market price (MP) = factor cost (FC) + net indirect taxes (NIT). NIT changes from ₹900 crore to ₹500 crore, a decrease of ₹400 crore. Since FC is explicitly unchanged, MP must also decrease by ₹400 crore. Option A reverses the direction, option C uses the final NIT rather than the change, and option D ignores the identity.
From MP = FC + NIT, the change in factor cost is ΔFC = ΔMP − ΔNIT. Substituting the given changes gives ΔFC = ₹700 crore − ₹250 crore = ₹450 crore. Thus factor cost increases by ₹450 crore. Option A reports only the tax change, option C reports only the market-price change, and option D incorrectly adds both changes.
Market price equals factor cost plus net indirect taxes: MP = FC + NIT. Represent the fall in FC as −₹500 crore and the rise in NIT as +₹200 crore. Therefore, ΔMP = −500 + 200 = −₹300 crore, meaning market price decreases by ₹300 crore. Option C ignores the offsetting rise in NIT, while B and D give the wrong direction.
Depreciation is used to convert a gross aggregate into its corresponding net aggregate; it is not a component of the valuation gap between market price and factor cost. That gap is adjusted only through net indirect taxes: Market Price = Factor Cost + Net Indirect Taxes. Therefore, depreciation is not subtracted in this conversion, and option A correctly describes its role. Options B and C confuse it with taxes or subsidies.
Net factor income from abroad changes the geographical scope of an aggregate: it converts a domestic measure into a national measure, or vice versa. Market price and factor cost, however, are different valuation bases for the same domestic or national aggregate, and their conversion uses net indirect taxes. Hence option A is correct. Depreciation concerns gross versus net, while direct tax is unrelated to this conversion.
The governing formula is GDP at factor cost = GDP at market price − net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies: ₹320 − ₹80 = ₹240 crore. Therefore, GDP at factor cost = ₹2,400 − ₹240 = ₹2,160 crore. Option B is correct. ₹2,240 crore would reflect an incorrect adjustment, while the other options do not follow the market-price conversion.
To move from factor cost to market price, add net indirect taxes. Net indirect taxes = indirect taxes − subsidies = 260 − 90 = ₹170 crore. Thus, NNP at market price = 1,850 + 170 = ₹2,020 crore. Option C is correct. Subtracting the net tax would move in the opposite direction, and adding the gross tax without deducting subsidies would give an incorrect result.
The market-price minus factor-cost difference gives net indirect taxes: 2,750 − 2,590 = ₹160 crore. Since net indirect taxes = indirect taxes − subsidies, indirect taxes = 160 + 70 = ₹230 crore. Therefore option C is correct. ₹160 crore is only the net indirect tax, while ₹90 crore incorrectly subtracts the subsidy from the net amount and the remaining option does not satisfy the identity.
The governing relation is Market Price = Factor Cost + Net Indirect Taxes, where Net Indirect Taxes = Indirect Taxes − Subsidies. If subsidies exceed indirect taxes, net indirect taxes become negative. Rearranging gives Factor Cost = Market Price − Net Indirect Taxes, so subtracting a negative amount makes factor cost greater than market price. Therefore, option C is correct; option A would produce the opposite relationship.
Use GDP at market price = GDP at factor cost + Net Indirect Taxes. Hence, Net Indirect Taxes = ₹1,800 − ₹1,650 = ₹150 crore. For each option, calculate indirect taxes minus subsidies: A gives ₹90 crore, B gives ₹150 crore, C gives zero, and D gives −₹150 crore. Only option B produces the required net indirect tax of ₹150 crore, so it is correct.
Net Indirect Taxes = Indirect Taxes − Subsidies. When indirect taxes fall by ₹25 crore, NIT falls by ₹25 crore. When subsidies rise by ₹15 crore, NIT falls by another ₹15 crore because subsidies are subtracted. Thus the total fall is ₹40 crore, and the new NIT is ₹90 − ₹40 = ₹50 crore. Therefore option A is correct; ₹65 crore considers only the tax fall.
The governing formula is Net Indirect Taxes = Indirect Taxes − Subsidies. Let subsidies be S. Given NIT = −₹30 crore and indirect taxes = ₹85 crore, we have −30 = 85 − S. Therefore S = 85 + 30 = ₹115 crore. The negative NIT confirms that subsidies exceed indirect taxes. Option A incorrectly subtracts the negative value, while C satisfies the equation.
To convert NDP from market price to factor cost, subtract net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies: ₹180 − ₹60 = ₹120 crore. Therefore, NDP at factor cost = ₹1,250 − ₹120 = ₹1,130 crore. Equivalently, subtract taxes and add subsidies: ₹1,250 − ₹180 + ₹60 = ₹1,130 crore. Thus option B is correct; option A subtracts the subsidy incorrectly.
National income is NNP at factor cost. To obtain NNP at market price, add net indirect taxes: NNP at MP = NNP at FC + NIT. Substituting the values gives ₹2,100 + (−₹50) = ₹2,050 crore. A negative NIT reduces market-price valuation because subsidies exceed indirect taxes. Therefore option B is correct; option D wrongly treats the negative tax as a positive addition.
Market price = Factor cost + Net Indirect Taxes, and NIT = indirect taxes − subsidies. A ₹40 crore rise in indirect taxes increases NIT by ₹40 crore. A ₹15 crore fall in subsidies increases NIT by another ₹15 crore because less is subtracted. Thus NIT rises by ₹55 crore. Since factor cost is constant, market price also rises by ₹55 crore. Therefore option C is correct.
The governing relation is MP − FC = net indirect taxes = indirect taxes − subsidies. The required difference is −₹90 crore. In option B, ₹60 crore − ₹150 crore = −₹90 crore, exactly matching the given value. Option A gives +₹90 crore, option C gives +₹90 crore, and option D gives +₹90 crore. A negative difference means subsidies exceed indirect taxes.
The governing identity is GDP at market price = GDP at factor cost + net indirect taxes. Since market price is 8% higher than factor cost, calculate 8% of the given base: 0.08 × ₹5,000 crore = ₹400 crore. Thus net indirect taxes are ₹400 crore. ₹320 crore uses an incorrect percentage, ₹540 crore adds an unrelated amount, and ₹5,400 crore is the resulting market-price GDP rather than the tax difference.
The question states that factor cost is 5% higher than market-price output, so the base is ₹4,800 crore. Five percent of ₹4,800 crore is 0.05 × 4,800 = ₹240 crore. Adding this increase gives factor cost = ₹4,800 + ₹240 = ₹5,040 crore. Option B merely repeats the base, while A decreases it and D applies an excessive increase. Therefore, option C is correct.
QUIZ COMPLETE
