1. 110 marks) Readmania produces books. The sales of Readmania last year (2017)
ID: 1141837 • Letter: 1
Question
1. 110 marks) Readmania produces books. The sales of Readmania last year (2017) were $23million. To produce the books Readmania purchases the text from 6 authors-each author was paid $0.5million for their intellectual property on the text. Paper was purchased from Flatpulp for $6.5million. Glue and cardboard was purchased from Bindersplus at a cost of $0.3million and the services of a Printing Agent to print all the copies was hired at a cost of $7million. All of these firms are located in Australia, the inputs were all produced in 2017 and none of these firms purchases intermediate goods. Using the value added/production approach to calculating GDP-explain how much Readmania contributed to GDP in 2017 a.Explanation / Answer
Ans:
Under value added approach,value addition made by Readmania should be considered.
Value added = $23million - ($0.5million * 6) -$6.5million -$0.3million-$7million
= $23million - $3million - -$6.5million -$0.3million-$7million
= $23million - $16.8million
= $6.2 million
Readmania contribution to GDP in 2017 = $6.2 million
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