Market price (MP) Once goods and services are produced they are sold in a market place at a set market price. The market price is the price that consumers will pay for the product when they purchase it from the sellers. Taxes charged by the government will be added onto the factor price while subsides provided will be reduced from the factor price to arrive at the market price. Taxes are added on because taxes are costs that increase the price, and subsidies are reduced because subsidies are already included in the factor cost, and cannot be double counted when market price is calculated.
Thus, MP = FC + Indirect Taxes - Subsidies ...... Equation ( ) Or, FC = MP - Indirect Taxes + Subsidies ........... Equation ( ) - - National Income National Income (NNP FC ) = Gross Value Added by all the production Enterprises within the Domestic Territory of the Country – Depreciation – Net Indirect Taxes + Net Factor Income from Abroad [Where, Net Indirect Taxes = Indirect tax – Subsidies] [Gross Value Added = Value of Output – Intermediate Consumption] Value of Output = Sales + Change in Stock Where, Change in Stock = Closing Stock – Opening Stock Note: If entire out put is sold within the year, then value of output will be equal to sales itself. or Value of Output = Price x Quantity Sold GDP MP = Private Final Consumption + Government Final Consumption Expenditure + Gross Domestic Capital Formation + Net Exports (Exports – Imports)