Question

Explain the concept of Gross National Product at Factor Cost.

Answer 1

The market price and the factor cost vary significantly. Profits and expenses related to the production of goods and services are included in the factor cost. Consequently, the gross national product at factor cost is obtained by deducting indirect taxes and adding subsidies to the GNP at market value.

Symbolically,

GNP at Factor Cost = GNP at Market Price − Net Indirect Taxes

Therefore, the total factor cost value of all finished products and services produced in a country during a given year can be referred to as the gross national product at factor cost. Employee remuneration, self-employed income, operating surplus, and fixed capital consumption are all included.