Suppose, there are only three firms in a hypothetical economy, viz. A, B and C. During a given period of time, the following transactions were undertaken by them:
\[
\text{(I) Firm A sold goods worth ₹2,000 to Firm B and ₹1,200 to Firm C.} \\
\text{(II) Firm B sold goods worth ₹1,100 to Firm A and ₹3,500 to Firm C.} \\
\text{(III) Firm C sold to households for final consumption, goods worth ₹5,700.}
\]
Estimate the value of Net Domestic Product at Market Price (NDPMP), assuming depreciation to be ₹120.
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Solution and Explanation
To calculate Net Domestic Product at Market Price (NDPMP), we follow these steps:
1. Calculate Gross Domestic Product (GDPMP) at Market Price:
GDPMP is calculated by adding all transactions in the economy. The formula is: \[ \text{GDP} = \text{Value of Sales to Households} + \text{Intermediate Sales between Firms} \] The total value of sales to households = ₹5,700.
The intermediate transactions (sales between firms) = ₹2,000 (Firm A to Firm B) + ₹1,200 (Firm A to Firm C) + ₹1,100 (Firm B to Firm A) + ₹3,500 (Firm B to Firm C) = ₹7,800.
Therefore, GDPMP = ₹5,700 + ₹7,800 = ₹13,500.
2. Subtract Depreciation:
To find the Net Domestic Product (NDPMP), we subtract depreciation from GDPMP. NDP = GDPMP - Depreciation
NDPMP = ₹13,500 - ₹120 = ₹13,380
Thus, the Net Domestic Product at Market Price (NDPMP) is ₹13,380 crore.
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