Calculate the value of final goods (which will become part of the GDP) in the case given below.
A cotton farmer sells his weekly output of cotton to a weaver for Rs 5,000. The weaver weaves cloth out of this and sells it to the cloth trader for Rs 6,500. The trader sells part of this cloth to a shirt maker for Rs 5,000 and the remaining cloth to a retailer for Rs 3,000. The shirt maker makes 60 shirts, each selling for Rs150. The cloth retailer sells his cloth to the final customers for Rs 4,000.
Value added by the farmer = Rs 5,000
Value added by the weaver
= Rs 6,500 -Rs 5,000 = Rs 1,500
Value added by the trader
= Rs 5,000+ Rs 3,000- Rs 6,500 = Rs 1,500
Value added by the retailer
= Rs 4,000 - Rs 3,000 = Rs 1,000
Value added by the shirt maker
= 60 x 150-Rs 5,000 = Rs 4,000
Total value of final goods = value added by all
=Rs (5,000 +1,500 +1,500 + 1,000 + 4,000) = Rs 13,000
This is the same value as the final goods, i.e. Rs 4,000 for the cloth and Rs 9,000 for the shirts.