If market price is x and net indirect taxes are negative 10% of market price while factor cost is ₹4,400 crore, what is market price?
Answer and explanation
Correct answer: ₹4,000 crore
Use FC = MP − NIT. Since NIT is negative 10% of market price, NIT = −0.10x. Thus FC = x − (−0.10x) = 1.10x. Substituting the given factor cost, ₹4,400 = 1.10x, so x = ₹4,400 ÷ 1.10 = ₹4,000 crore. Therefore option B is correct. A negative net indirect tax means subsidies exceed indirect taxes, so factor cost is greater than market price.
Frequently asked questions
What is the correct answer to this question?
₹4,000 crore
Why is this the correct answer?
Use FC = MP − NIT. Since NIT is negative 10% of market price, NIT = −0.10x. Thus FC = x − (−0.10x) = 1.10x. Substituting the given factor cost, ₹4,400 = 1.10x, so x = ₹4,400 ÷ 1.10 = ₹4,000 crore. Therefore option B is correct. A negative net indirect tax means subsidies exceed indirect taxes, so factor cost is greater than market price.
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.
