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

Answer 1

Calculate Gross Value Added (GVA) of Firm Y.

GV A_Y = Value of Output of Y − Intermediate Consumption of Y

Intermediate Consumption of Y = Purchases made by Y from X = 300 crore.

GV A_Y = 1,400 − 300

= 1,100 crore

Find the Value of Output for Firm X.

GV A_X = GV A_Y, we have GV A_X = 1,100 crore

GV A_X = Value of Output of X − Intermediate Consumption of X

Intermediate Consumption of X = Purchases made by X from Y = 400 crore.

1,100 = Value of Output of X − 400

X = 1, 100 + 400

= 1,500 crore

Determine Domestic Sales of Firm X.

Value of Output of X = Total Sales + Addition to Stock

1,500 = Total Sales + 100

Total Sales = 1,400 crore

Total Sales = Domestic Sales + Exports

1,400 = Domestic Sales + 200

Domestic Sales = 1,200 crore