CBSE Class 12-commerce Macroeconomics Classification of Goods and Value Added Method

How do we classify goods and value added methods? Understand the process from the CBSE Class 12 Commerce Economics chapter National Income Accounting by referring to our revision notes, sample papers, past year papers etc. at TopperLearning.

The term that is used to denote the net contribution made by a firm is called its value added. We have seen that the raw materials which a firm buys from another firm which are completely used up in the process of production are called ‘intermediate goods’. Therefore the value added of a firm is, value of production of the firm – value of intermediate goods used by the firm. The value added of a firm is distributed among its four factors of production, namely, labour, capital, entrepreneurship and land. Therefore wages, interest, profits and rents paid out by the firm must add up to the value added of the firm. Value added is a flow variable.