If GDP at factor cost is ₹960 crore, indirect taxes are ₹180 crore, and subsidies are ₹70 crore, what is GDP at market price?
Answer and explanation
Correct answer: ₹1,070 crore
The conversion from GDP at factor cost to GDP at market price requires adding net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies: ₹180 crore − ₹70 crore = ₹110 crore. Therefore, GDP at market price = ₹960 crore + ₹110 crore = ₹1,070 crore. Subsidies must be subtracted because they reduce the price paid by buyers relative to factor cost.
Frequently asked questions
What is the correct answer to this question?
₹1,070 crore
Why is this the correct answer?
The conversion from GDP at factor cost to GDP at market price requires adding net indirect taxes. Net indirect taxes equal indirect taxes minus subsidies: ₹180 crore − ₹70 crore = ₹110 crore. Therefore, GDP at market price = ₹960 crore + ₹110 crore = ₹1,070 crore. Subsidies must be subtracted because they reduce the price paid by buyers relative to factor cost.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Aggregates related to national income - Market price and factor cost.
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