Gross Domestic Product At Factor Cost Calculator

Formula Used:

\[ \text{GDPfc} = \text{GDPmp} + \text{Ss} - \text{IT} \]

Gross Domestic Product at Factor Cost:

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1. What is Gross Domestic Product at Factor Cost?

Gross Domestic Product at Factor Cost is a measure of the total value of all goods and services produced within a country's borders during a specific time period, calculated at factor cost rather than market prices.

2. How Does the Calculator Work?

The calculator uses the formula:

\[ \text{GDPfc} = \text{GDPmp} + \text{Ss} - \text{IT} \]

Where:

\( \text{GDPmp} \) — Gross Domestic Product at Market Price
\( \text{Ss} \) — Subsidies provided by the government
\( \text{IT} \) — Indirect Taxes imposed on goods and services

Explanation: This formula converts market price GDP to factor cost GDP by adding subsidies (which reduce market prices) and subtracting indirect taxes (which increase market prices).

3. Importance of GDPfc Calculation

Details: GDP at factor cost provides a more accurate measure of the income generated by factors of production (land, labor, capital) in an economy, excluding the effects of taxes and subsidies on market prices.

4. Using the Calculator

Tips: Enter all values in the same currency units. Ensure all values are non-negative and represent accurate economic data for the period being analyzed.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between GDP at factor cost and GDP at market price?
A: GDP at factor cost measures the value of output at the cost of factors of production, while GDP at market price measures the value at which goods and services are actually sold in the market.

Q2: Why are subsidies added and indirect taxes subtracted?
A: Subsidies reduce market prices below factor costs, so they are added back. Indirect taxes increase market prices above factor costs, so they are subtracted.

Q3: What types of subsidies are included in this calculation?
A: All government subsidies that affect the market prices of goods and services, including production subsidies, export subsidies, and consumption subsidies.

Q4: What types of indirect taxes are considered?
A: All taxes on goods and services, including value-added tax (VAT), sales tax, excise duties, and customs duties.

Q5: When is GDP at factor cost more useful than GDP at market price?
A: GDP at factor cost is particularly useful for analyzing income distribution and factor productivity, as it excludes the distorting effects of taxes and subsidies.