The market price paid by consumers is ₹5,000 crore and net indirect taxes are ₹600 crore. How much will producers receive at factor cost?
Answer and explanation
Correct answer: ₹4,400 crore
To convert market price into factor cost, subtract net indirect taxes because market price includes this tax component. Factor Cost = Market Price − Net Indirect Taxes = ₹5,000 crore − ₹600 crore = ₹4,400 crore. Thus, option B is correct. ₹5,000 crore ignores the tax adjustment, while ₹5,600 crore incorrectly adds the taxes.
Frequently asked questions
What is the correct answer to this question?
₹4,400 crore
Why is this the correct answer?
To convert market price into factor cost, subtract net indirect taxes because market price includes this tax component. Factor Cost = Market Price − Net Indirect Taxes = ₹5,000 crore − ₹600 crore = ₹4,400 crore. Thus, option B is correct. ₹5,000 crore ignores the tax adjustment, while ₹5,600 crore incorrectly adds the taxes.
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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