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Chapter 19: Problem 5

What is meant by a firm's "value added"?

Short Answer

Expert verified
'Value added' by a firm refers to the enhancement or increased worth given to a product or service through the company's various activities, enhancing its appeal to customers and increasing its market value.

Step by step solution

01

Understanding Value

To understand 'value added', you first need to comprehend the concept of 'value'. Value, within the context of economics and businesses, usually refers to the worth of a product or service as determined by the market, impacted by variables like supply and demand.
02

Applying Value to a Firm

A firm adds value through its various activities in the production process. This involves turning raw materials into finished products, improving the worth of the product or service, or enhancing the consumer experience.
03

Describing the Concept of Value Added

'Value added,' then, refers to the enhancement a company gives its product or service before offering it to customers. This could be in the form of production processes, marketing, customer service, branding, and other business operations. It represents the additional features or changes made to a product or service, making it more appealing or beneficial to the customer and hence, increasing its market value.

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Most popular questions from this chapter

During an intcrvicw with a reportcr, formcr Microsoft CEO Stcvc Ballmer discussed the data compiled on the usafacts.org Web site. Ballmer asked if the reporter knew how many people the government employed and provided the answer: "Almost 24 million. Would you have guessed that?" a. Is local, state, and federal governments spending on salaries and benefits for these employees considered production as measured by GDP? Briefly explain. b. According to data on the usafacts.org site, in 2014 the federal government spent \(\$ 57.3\) billion on Social Security payments to retired and disabled people. Is this federal government spending considered production as measured by GDP? Briefly explain.

Describe the four major components of expenditures in GDP and write the equation that represents the relationship between GDP and the four expenditure components.

Assuming that inflation has occurred over time, what is the relationship between nominal GDP and real GDP in each of the following situations? a. In the years after the base year b. In the base year c. In the years before the base year

Why does inflation make nominal GDP a poor measure of the increase in total production from one year to the next? How does the U.S. Bureau of Economic Analysis deal with this drawback?

What is the difference between GDP and GNP? Briefly explain whether the difference is important for the United States.
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