Each year after a regular spring cleaning, Maria spruces up her home a little by retexturing and repainting the walls of one room in her house. In a given year, she spends $\backslash (25$on magazines to get ideas about wall textures and paint shades, $\backslash )45$on newly produced texturing materials and tools, $\backslash (35$on new paintbrushes and other painting equipment, and $\backslash )175$on newly produced paint. Normally, she preps the walls, a service that a professional walltexturing specialist would charge $\backslash (200$to do, and applies two coats of paint, a service that a painter would charge $\backslash )350$to do, on her own.

a. When she purchases her usual set of materials and does all the work on her home by herself in a given spring, how much does Maria's annual spring texturing and painting activity contribute to GDP?

b. Suppose that Maria hurt her back this year and is recovering from surgery. Her surgeon has instructed her not to do any texturing work, but he has given her the go-ahead to paint a room as long as she is cautious. Thus, she buys all the equipment required to both texture and paint a room. She hires someone else to do the texturing work but does the painting herself. How much would her spring painting activity add to GDP?

c. As a follow-up to part (b), suppose that as soon as Maria bends down to dip her brush into the paint, she realizes that painting will be too hard on her back after all. She decides to hire someone else to do all the work using the materials she has already purchased. In this case, how much will her spring painting activity contribute to GDP?

Step by step solution

01

    Introduction

The total monetary worth of all final goods and services produced within a nation's territorial boundaries in a given period is known as GDP.

02

    Explanation of option a

GDP is the total market value of all final output of goods and services produced and transacted in an economy during a given year.

03

    Contribution to GDP

Person $M$spends $\$25$on magazines, $\$45$on newly manufactured texturing materials, $\$35$on new paint brushes, and $\$175$on newly manufactured paints. She has only made these two market transactions in her life. As a result, these transactions will add to GDP.

Contribution to GDP$=$Spending on magazines $+$materials $+$new paint brushes $+$paints

role="math" localid="1651665577215" $$\begin{gathered} =\$25+\$45+\$35+\$175 \\ =\$280 \end{gathered}$$

As a result, painting contributes $\$280$to GDP.

And because there is no market transaction, the labour she did to paint her own house cannot be included in the GDP.

04

Step 4:     Explanation of option b

Assume that person $\$M$has engaged a texturing specialist, and that the market value of the texturing service is $\$200$. As a result, this sum will be added to the GDP.

So contribution towards GDP is;

Contribution to GDP $=$Spending on magazines $+$materials $+$new paint brushes $+$paints $+$market value for texturing service

role="math" localid="1651666437904" $$\begin{gathered} =\$25+\$45+\$35+\$175+\$200 \\ =\$480 \end{gathered}$$

As a result, the $\$830$ painting activity contributes $\$480$ to GDP.

05

   Explanation of option c

All painting processes would be considered market transactions and could be included in GDP estimates if texturing and painting were entrusted to experts.

So, when the market performs all of the activities, the contribution to GDP is:

Contribution to GDP
$$\begin{gathered} =\$25+\$45+\$35+\$175+\$200+\$350 \\ =\$830 \end{gathered}$$

As a result, the painting activity contributes $\$830$to GDP.

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