Question

The table below provides information about the cost of inputs and value of output for the production of a road bike. Note there are four different stages of production. Raw materials Manufacturing Construction Sale by the retailer Rubber for one tire ($20) Tire maker sells tires for $30 each Bike mechanic puts everything together and sells the bike for $395 Retailer sells the bike for $500 Aluminum for the frame ($80) Other component materials ($70) Frame maker sells bike frame and components for a total of $275 Instructions: Round your answers to the nearest dollar. a. What value is added by the supplier of the raw materials? . b. What value is added by the tire maker? . c. What value is added by the maker of the frame and components? . d. What value is added by the bike mechanic? . e. What value is added by the bike store? . f. What is the total contribution of the bike to GDP?

Answer 1

Answer:
(a)
The value added by the supplier of the raw materials is
= $20 + $80 + $70
= $170

(b)
The value added by the tire market is given as
= Price of a tire - Cost of raw materials purchased (which is rubber here)
= $30 - $20
= $10

(c)
The value added by the maker of the frame and components is given as
= Price of a frame - Cost of raw materials
= $275 - ($80 + $70)
= $275 - $150
= $125

(d)
The value is added by the bike mechanic is given by
= Price of the bike assembled by the bike mechanic - Cost of tires and frame
= $395 - ($30 + $275)
= $90

(e) & (f)
The desired data of selling price of the bike by the bike store is missing the question above. So value and GDP added by the bike store cannot be calculated.

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