Question

Q1a)The market basket for a typical household is made up of 1 unit of housing , 30 units of food , and -8 units of shopping If the price of housing is 472 , the price of food 16 , and the price of shopping 19, compute the cost of the market basket

b)Without using intermediate goods , a lumberjack produces and sells 136 to a sawmill . The sawmill turns the lumber into planks and sells them for a price of 272 to a furniture maker . The furniture maker uses the planksto make tables , chairs , and cupboards . The furniture maker has sales of 571 . What is the value added by the sawmill ?

Answer 1

Q1a) Market basket contents = 1U Housing, 30U food, -8U Shopping

Price of Housing = 472

Price of food = 16

Price of shopping = 19

Cost of market basket = {(472*1) + (16*30) + (19*-8) = (472 + 480 - 152) = 800

So the answer is 800.

b) So here in this question

For lumberjack, Value of intermediate goods=0, Value of final goods=136

In sawmill, Value of intermediate goods=136(Supply by lumberjack acts as input here), Value of final goods=272

So the value added by the sawmill= (Value of final goods - Value of intermediate goods) = (272-136) = 136

So the correct answer is 136