Question

The following table lists the stages in the production of a personal computer. What is the value of the computer in GDP? $$ \begin{array}{lc} \text { Stage } & \text { Value Added } \\ \hline \text { Components manufacture } & \$ 100 \\ \text { Assembly } & \$ 250 \\ \text { Wholesaler } & \$ 500 \\ \text { Retailer } & \$ 2,500 \\ \hline \end{array} $$

Short answer

Answer: The value of the personal computer in the GDP is $3350.

Step-by-step solution

Understanding the terms

The given table shows the added value of a personal computer at different stages of its production, from the components manufacture to the final retailer sale. Value-Added is the measure of how much each stage has contributed to the output's final value in terms of production cost or the value of the product itself.

Identify the values

From the table, we have the following values added at each stage: 1. Components manufacture: $100 2. Assembly: $250 3. Wholesaler: $500 4. Retailer: $2500

Calculate the total value-added

Add the value-added at each stage to find the total value-added to the personal computer during production. This would be the value of the computer in GDP. Total Value-Added = Components manufacture + Assembly + Wholesaler + Retailer Total Value-Added = \(100 + \)250 + \(500 + \)2500

Find the value of the computer in GDP

Now, compute the sum: Total Value-Added = \(100 + \)250 + \(500 + \)2500 = $3350 Therefore, the value of the computer in GDP is $3350.

Key concepts

GDP Calculation

Gross Domestic Product (GDP) is a crucial economic measure that represents the total monetary value of all goods and services produced within a country over a specified period. To calculate GDP, one must sum up the values added at each stage of the production process for all goods and services. GDP reflects the economic activity and health by offering insights into the size and performance of an economy. This measurement allows comparison across different time periods or geographical areas.

• GDP calculation involves understanding the production aspect, where each stage in the supply chain adds value to a product.
• In our example, the stages involved in making a personal computer are components manufacture, assembly, wholesaler, and retailer.
• The GDP can be calculated by summing the total value added at each stage, which in this case results in $3350.

Understanding GDP helps policymakers and economists formulate economic policies, observe economic performance, and establish effective measures. By comprehensively summing up added values, a clearer picture of the economy's health is achieved.
Understanding the GDP calculation method reveals how businesses, from manufacturers to retailers, contribute to the economy’s overall growth.

Production Stages

In any production process, different stages cumulatively add value to a product, ultimately constituting its final market value. Each stage of production provides an increase in the product’s worth, referred to as "value added."

• The initial stage often begins with raw materials or components manufacturing, where basic parts are created. In our example, this stage adds $100.
• Next, assembly combines these components into one functioning product, such as assembling the computer parts into a complete system, contributing an additional $250.
• A wholesaler then takes over, further enhancing the computer’s value in distribution, reflected by a $500 value increment.
• Finally, the retailer sells the finished computer to consumers, adding the highest value of $2500 due to additional services like customer support and marketing.

Each of these stages not only increases the economic worth of the product but also highlights the specific role every sector of the supply chain plays in wealth creation. Knowing the production stages helps businesses streamline operations, optimize costs, and set competitive pricing models.

Economic Measurements

Economic measurements like GDP play a fundamental role in assessing and comparing the economic productivity and efficiency of a nation. These measurements provide crucial data that inform decisions at various levels, from governmental policy-making to investment strategies.

• Understanding such economic measures helps to track economic growth, inflation rates, and living standards.
• GDP, employment rates, and consumer price indices combine to offer insights into economic stability and progression.
• For economists, these metrics are key parameters in modeling economic trends and predicting future developments.

Assessing economic measurements assists in understanding economic discrepancies between regions, aiding in the development of targeted economic policies and interventions. It is about more than just numbers; it's about the stories they tell about living standards and prosperity.
Everyone from policymakers to individual citizens benefits from comprehending these measurements, as they reflect not only national economic health but also impact personal economic well-being.