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CA Foundation · Business Economics · Determination of National Income

A farmer sells wheat worth ₹40,000 to a flour mill. The mill grinds it and sells flour worth ₹60,000 to a bakery. The bakery makes bread and sells it to consumers for ₹90,000. What is the total value added across the three stages?

Total value added is ₹90,000, equal to the value of the final bread sold to consumers. The stage-wise values added are 40,000, 20,000 and 30,000. Adding all sales of ₹1,90,000 would double count the wheat and flour.

  1. A₹90,000Correct
  2. B₹1,90,000
  3. C₹1,50,000
  4. D₹60,000

Explanation

Value added: farmer 40,000 (assuming no inputs), mill 60,000-40,000=20,000, bakery 90,000-60,000=30,000. Total = 40,000+20,000+30,000 = ₹90,000, which equals the final value of bread. Summing all sales (1,90,000) double counts intermediate goods.

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