The total income of a nation can be expressed using many parameters like GDP, GNP, NDP, NNP etc. There are again sub-variations like GDP at factor cost, GVA at basic price, GDP at market price etc.
GDP
- Gross Domestic Product (GDP) is the total money value of all final goods and services produced in the economic territories of a country in a given year.
- In simple terms, GDP is the product of the quantity of goods (and services) produced with their final price (value).
- GDP can be expressed at the constant price and at the current price.
- Constant price calculations are inflation adjusted (real GDP), while current price calculations include the inflation component too (nominal GDP).
- GDP can also be expressed at factor cost and market prices. Factor Cost vs Basic Price vs Market Price
General Relationship between Factor Cost and Market Price: Factor Cost + Indirect Tax – Subsidies = Market Price.
The relationship between Factor Cost and Basic Price: Factor cost + production
tax – production subsidies = Basic prices. The relationship between Basic Price and Market Price: Basic Price + Product
tax – Product Subsidy = Market Price. Note: Thus, it is clear that market price includes both product tax as well as
production tax while excludes both product and production subsidies. Basic price: Basic prices exclude any taxes on products the producer receives from
the purchaser and passes on to the government (Eg: GST or Sales Tax or Services Tax)
but include any subsidies the producer receives from government and uses to lower
the prices charged to purchasers. In simple terms, basic price is the subsidized price
without tax.