If the difference between market price and factor cost is ₹90 crore and indirect taxes are ₹140 crore, then what are subsidies?
Answer and explanation
Correct answer: ₹50 crore
The difference between market price and factor cost equals net indirect taxes: GDP_MP − GDP_FC = indirect taxes − subsidies. Therefore, 90 = 140 − subsidies, so subsidies = 140 − 90 = ₹50 crore. Option B is correct. ₹90 crore is the net indirect tax amount, whereas ₹230 crore incorrectly adds taxes and the given difference instead of finding their difference.
Frequently asked questions
What is the correct answer to this question?
₹50 crore
Why is this the correct answer?
The difference between market price and factor cost equals net indirect taxes: GDP_MP − GDP_FC = indirect taxes − subsidies. Therefore, 90 = 140 − subsidies, so subsidies = 140 − 90 = ₹50 crore. Option B is correct. ₹90 crore is the net indirect tax amount, whereas ₹230 crore incorrectly adds taxes and the given difference instead of finding their difference.
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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