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 values of Domestic sales of firm X :
S. No. Items Amount (in ₹ crore) (i) Value of Output of firm Y 400 (ii) Purchases by firm X from firm Y 40 (iii) Exports by firm X 20 (iv) Purchases by firm Y from firm X 30 (v) Additions to Stock of firm X 10 (vi) Consumption of fixed capital 20
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 values of Domestic sales of firm X :
| S. No. | Items | Amount (in ₹ crore) |
|---|---|---|
| (i) | Value of Output of firm Y | 400 |
| (ii) | Purchases by firm X from firm Y | 40 |
| (iii) | Exports by firm X | 20 |
| (iv) | Purchases by firm Y from firm X | 30 |
| (v) | Additions to Stock of firm X | 10 |
| (vi) | Consumption of fixed capital | 20 |
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Solution and Explanation
We must find the domestic sales of firm X. Value of output of a firm is its domestic sales plus its exports plus the addition to its stock.
Gross Value Added (GVA) is value of output minus intermediate consumption. So we first need the GVA of each firm.
Step 2: Find the intermediate consumption of each firm:
Purchases by firm Y from firm X are goods that Y uses up in production. They are the intermediate consumption of Y, which is Rs. 30 crore.
Purchases by firm X from firm Y are the intermediate consumption of X, which is Rs. 40 crore.
Step 3: Find the GVA of firm Y:
\[ \text{GVA of Y} = \text{Value of output of Y} - \text{Intermediate consumption of Y} = 400 - 30 = 370 \]
So GVA of firm Y is Rs. 370 crore.
Step 4: Find the GVA of firm X:
The question says both firms have equal GVA. So GVA of firm X is also Rs. 370 crore.
Step 5: Find the value of output of firm X:
\[ \text{Value of output of X} = \text{GVA of X} + \text{Intermediate consumption of X} = 370 + 40 = 410 \]
Step 6: Find the domestic sales of firm X:
Output = Domestic sales + Exports + Addition to stock. So domestic sales = Output - Exports - Addition to stock.
\[ \text{Domestic sales of X} = 410 - 20 - 10 = 380 \]
Step 7: Why consumption of fixed capital is not used:
GVA here is gross, so it already includes depreciation. Consumption of fixed capital of Rs. 20 crore is extra data and does not enter the calculation.
Final Answer:
Domestic sales of firm X are Rs. 380 crore.\[ \boxed{\text{Rs. 380 crore}} \]
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