Farmers produce wheat worth Rs 150 using fertilisers worth Rs 20 bought from other firms. They sell wheat worth Rs 60 to bakers, who use it up to produce bread worth Rs 260. What is the total value added by the farmers and the bakers?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs 330
Given:
Farmers: output Rs 150, fertilisers bought Rs 20
Bakers: output Rs 260, wheat bought Rs 60
Value added = Value of production − Value of intermediate goods used.
Farmers’ value added = 150 − 20 = Rs 130
Bakers’ value added = 260 − 60 = Rs 200
Total value added = 130 + 200 = Rs 330
Fertilisers and wheat are inputs used up in production. Adding them again would be double counting.
NCERT (2026-27): “2.2.1 The Product or Value Added Method Here all the variables are expressed in terms of money. We can think of the market prices of the goods being used to evaluate the different variables listed here. And we can introduce more players in the chain of production in the example and make it more realistic and complicated. For example, the farmer may be using fertilisers or pesticides to produce wheat. The value of these inputs will have to be deducted from the value of output of wheat. Or the bakers may be selling the bread to a restaurant whose value added will have to be calculated by subtracting the value of intermediate goods (bread in this case). …” |