Monday, November 16, 2009

Value Addtion:

The difference between cost of materials and labor to produce a product, and the sale price of a product is the value added. In national accounts used in macroeconomics, it refers to the contribution of the factors of production, i.e., land, labor, and capital goods, to raising the value of a product and corresponds to the incomes received by the owners of these factors. The national value added is shared between capital and labor (as the factors of production), and this sharing gives rise to issues of distribution.


M. Umer Toor said...

An example of a value added product i recently came across, which i least expected, happened to be originating from tomatoes, which i like to serve myself with black pepper on it. You know how tough it can be for a big farmer to sell tomatoes when his fellow poor, small farmers suffer losses. So this big farmer didn't put his tomatoes in the market but extracted pulp from it, stored in refrigerators to sell when prices are reasonable. He called it a value-added thing.