If NDP at market price is ₹1,250 crore while indirect taxes are ₹180 crore and subsidies are ₹60 crore, then what is NDP at factor cost?
Answer and explanation
Correct answer: ₹1,130 crore
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.
Frequently asked questions
What is the correct answer to this question?
₹1,130 crore
Why is this the correct answer?
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.
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.
