If the difference between market price and factor cost is ₹65 crore and indirect taxes are ₹100 crore, what are subsidies?
Answer and explanation
Correct answer: ₹35 crore
The difference between market price and factor cost is net indirect taxes. Since net indirect taxes = indirect taxes − subsidies, we have 65 = 100 − subsidies. Rearranging gives subsidies = 100 − 65 = ₹35 crore. Option C is the net indirect tax itself, whereas option D incorrectly adds the two figures and option A uses an incorrect subtraction.
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What is the correct answer to this question?
₹35 crore
Why is this the correct answer?
The difference between market price and factor cost is net indirect taxes. Since net indirect taxes = indirect taxes − subsidies, we have 65 = 100 − subsidies. Rearranging gives subsidies = 100 − 65 = ₹35 crore. Option C is the net indirect tax itself, whereas option D incorrectly adds the two figures and option A uses an incorrect subtraction.
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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