For a hypothetical economy, assuming there are only two firms (X and Y) with equal values of Gross Value Added (GVA).
On the basis of the following data, estimate the value of Domestic Sales of both the firms (X and Y) :
S. No. Items Amount (in ₹ crore) (i) Value of Output of firm Y 700 (ii) Purchases by firm X from firm Y 200 (iii) Exports by firm X 100 (iv) Purchases by firm Y from firm X 150 (v) Additions to Stock of firm X 50
For a hypothetical economy, assuming there are only two firms (X and Y) with equal values of Gross Value Added (GVA).
On the basis of the following data, estimate the value of Domestic Sales of both the firms (X and Y) :
| S. No. | Items | Amount (in ₹ crore) |
|---|---|---|
| (i) | Value of Output of firm Y | 700 |
| (ii) | Purchases by firm X from firm Y | 200 |
| (iii) | Exports by firm X | 100 |
| (iv) | Purchases by firm Y from firm X | 150 |
| (v) | Additions to Stock of firm X | 50 |
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Solution and Explanation
Domestic sales of a firm are the sales it makes inside the country. For each firm, output = domestic sales + exports + change in stock.
Also, Gross Value Added (GVA) = Value of output - Intermediate consumption. We use these two ideas together.
Step 2: Firm Y, intermediate consumption and GVA:
Firm Y buys goods from firm X worth Rs. 150 crore (item iv). For Y these are inputs, so intermediate consumption of Y = Rs. 150 crore.
GVA of Y = 700 - 150 = Rs. 550 crore.
Step 3: Firm Y, domestic sales:
The data shows no exports and no change in stock for Y. So all of its output is sold at home.
Domestic sales of Y = GVA of Y + intermediate consumption of Y = 550 + 150 = Rs. 700 crore.
Step 4: Firm X, GVA:
The question says both firms have equal GVA. So GVA of X = GVA of Y = Rs. 550 crore.
Step 5: Firm X, output and domestic sales:
Firm X buys goods from firm Y worth Rs. 200 crore (item ii). This is the intermediate consumption of X.
Value of output of X = 550 + 200 = Rs. 750 crore.
Output of X = domestic sales + exports + addition to stock. So 750 = domestic sales + 100 + 50.
Domestic sales of X = 750 - 100 - 50 = Rs. 600 crore.
Step 6: Put the working in a table:
| Item | Firm X (Rs. crore) | Firm Y (Rs. crore) |
|---|---|---|
| Intermediate consumption | 200 | 150 |
| GVA | 550 | 550 |
| Value of output | 750 | 700 |
| Exports + addition to stock | 150 | 0 |
| Domestic sales | 600 | 700 |
Final Answer:
Domestic sales of firm X = Rs. 600 crore and domestic sales of firm Y = Rs. 700 crore.
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