Question

For a hypothetical economy, assuming there are only two firm (X and Y) with equal values of Gross Value Added (GVA).

On the basis of the following data, estimate the values of Domestic Sales by firm X :

S. No.	Items	Amount (in ₹ crore)
(i)	Value of Output of firm Y	1,400
(ii)	Purchases by firm X from firm Y	400
(iii)	Exports by firm X	200
(iv)	Purchases by firm Y from firm X	300
(v)	Additions to Stock of firm X	100
(vi)	Consumption of fixed capital	100

Hint:

Find GVA of firm Y as 1,400 - 300 = 1,100, and use the same for firm X. Then Domestic sales = GVA - Exports - Additions to stock + Purchases from Y.

Answer 1

Step 1: Understand the concept:
The two firms have equal Gross Value Added (GVA). So if we find GVA of firm Y, we also know GVA of firm X.
For a firm, GVA = Value of output - Intermediate consumption.
Value of output of firm X = Domestic sales + Exports + Additions to stock.
Purchases made by a firm from the other firm are its intermediate consumption.

Step 2: Find GVA of firm Y:
Firm Y buys goods worth Rs. 300 crore from firm X. This is the intermediate consumption of firm Y.
\[ \text{GVA of Y} = 1,400 - 300 = \text{Rs. } 1,100 \text{ crore} \]

Step 3: Find GVA of firm X:
The two firms have equal GVA.
\[ \text{GVA of X} = \text{GVA of Y} = \text{Rs. } 1,100 \text{ crore} \]

Step 4: Find domestic sales of firm X:
Rearranging the GVA equation of firm X, we get Domestic sales = GVA - Exports - Additions to stock + Intermediate consumption.
Firm X buys goods worth Rs. 400 crore from firm Y. This is its intermediate consumption.
\[ \text{Domestic sales of X} = 1,100 - 200 - 100 + 400 \]
\[ \text{Domestic sales of X} = \text{Rs. } 1,200 \text{ crore} \]
Consumption of fixed capital (Rs. 100 crore) is not needed, because GVA is a gross measure.

Final Answer:
Domestic sales of firm X are Rs. 1,200 crore. \[ \boxed{\text{Rs. } 1,200 \text{ crore}} \]