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Question
Distinguish between ‘Gross Domestic Product’ at market prices and ‘Net Domestic Product’ at factor cost.
Distinguish Between
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Solution
| Sr. No. | Feature | Gross Domestic Product at Market Prices | Net Domestic Product at Factor Cost |
| 1. | Basis of valuation | Market prices | Factor incomes (factor cost) |
| 2. | Depreciation | Included depreciation | Excluded depreciation |
| 3. | Indirect taxes & subsidies |
Included (taxes added, subsidies excluded) | Excluded (taxes subtracted, subsidies added) |
| 4. | Focus | Value of production | Income earned by production factors |
| 5. | Use | Broad measure of economic activity | More accurate measure of income flow |
| 6. | Formula | GDPMP = NDPFC + Depreciation + net indirect taxes | NDPFC = GDPMP − Depreciation − net indirect taxes |
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