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Value added refers to the additional value created at a particular stage of production or through image and marketing. In modern neoclassical economics, especially 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 factors of production provide "services" which raise the unit price of a product (X) relative to the cost per unit of intermediate goods used up in the production of X. Value added is shared between the factors of production (capital, labor, also human capital), giving rise to issues of distribution. It has been suggested that this article or section be merged into image (disambiguation). ...
Wikibooks has more about this subject: Marketing Look up marketing in Wiktionary, the free dictionary. ...
Neoclassical economics refers to a general approach (a metatheory) to economics based on supply and demand which depends on individuals (or any economic agent) operating rationally, each seeking to maximize their individual utility or profit by making choices based on available information. ...
Circulation in macroeconomics Macroeconomics is a branch of Economics that deals with the performance, structure, and behavior of the economy as a whole. ...
In economics, factors of production are resources used in the production of goods and services. ...
Land in economics comprises all naturally occurring resources whose supply is inherently fixed (i. ...
Intermediate consumption is an economic concept used in national accounts, such as the United Nations System of National Accounts (UNSNA) and the US National Income and Product Accounts (NIPA). ...
Method of calculation
Economists use the value-added method as a way to avoid double counting, i.e., the counting of the same input twice. The sum of the value added in each of the different stages of production equals the value of the final product, the product that drops out of the production process and is thus not incorporated in some new product. Final products include consumer goods and fixed capital equipment. A numerical example illustrating the double counting issue further explains this concept below. In a microeconomic context, Value Added is simply measured as the value of the output produced (by a firm for example) minus the costs of the intermediate goods. The result must be equal to the sum of wages and profits. The issue of how the value added is shared between factors of production (usually considered simply as "labour" and "capital") translates to the question what part of value added goes to wages and what part to profits. Double-counting refers to a conceptual problem in social accounting practice, when the attempt is made to estimate the new value added by Gross Output, or the value of total investments. ...
Example calculation To understand the concept of value added, take the example of three simple stages of production: - 1000 Yen of miso soup is produced by a chef using pots, pans, and a stove, converting 500 Yen tofu and other ingredients. The chef and his or her tools are the "factors of production," while the tofu (and the other ingredients, ignored here) are the intermediate goods used up and converted into part of the soup.
- The tofu used was converted using 200 Yen of soy beans. The soy beans are the raw material used up and converted into the tofu.
- The soy beans were grown and harvested during the year. Assume, for simplicity, that the 200 Yen measures the value added in that sector. These beans are thus assumed to be simply results of the services of the factors of production.
If we simply add up the results of the three stages, we get a total of 1900 Yen. But this counts the tofu twice, first by itself and then as part of the miso soup. The soy beans are counted three times, in all three stages. This is double counting. Intermediate consumption is an economic concept used in national accounts, such as the United Nations System of National Accounts (UNSNA) and the US National Income and Product Accounts (NIPA). ...
On the other hand, we can get an accurate estimate of the final product by using the value-added method:
- The value added in the first process is 1000 Yen (the soup) minus 500 Yen (the tofu), equalling 500 Yen.
- the value-added in the second process is 500 Yen (the tofu) minus 200 Yen (the soy beans), equalling 300 Yen.
- the value added in the third process is, by assumption, 200 Yen.
The sum of these three is 1000 Yen, which is the same as the value of the final product, the miso soup.
National Accounts In national accounts such as the United Nations System of National Accounts (UNSNA) or the NIPA's, gross value added is obtained by deducting intermediate consumption from gross output. Thus gross value added is equal to net output. Net value added is obtained by deducting consumption of fixed capital (or depreciation charges) from gross value added. Net value added therefore equals gross wages, pre-tax profits net of depreciation, and indirect taxes less subsidies. Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. ...
The United Nations System of National Accounts is an international standard system of social accounts, first published in 1953. ...
See NIPA (disambiguation) for other meanings of the word. ...
Intermediate consumption is an economic concept used in national accounts, such as the United Nations System of National Accounts (UNSNA) and the US National Income and Product Accounts (NIPA). ...
Gross Output is an economic concept used in national accounts such as the United Nations System of National Accounts (UNSNA) and the US National Income and Product Accounts (NIPA). ...
Net output is an accounting concept used in national accounts such as the United Nations System of National Accounts (UNSNA) and the NIPAs, and sometimes in corporate or government accounts. ...
This article needs to be cleaned up to conform to a higher standard of quality. ...
Declining-balance depreciation of a $50,000 asset with $6,500 salvage value over 20 years. ...
A wage is the amount of money paid for some specified quantity of labour. ...
Declining-balance depreciation of a $50,000 asset with $6,500 salvage value over 20 years. ...
An indirect tax (such as sales tax, value added tax (VAT), or goods and services tax (GST)) is collected from the person who bears the tax by intermediaries and the proceeds passed on to government. ...
Marxist interpretation Karl Marx's concept of the value product is similar to the national accounting concept of net national product, or net value added. It is equal to the sum of labor-compensation (variable capital) and surplus-value (pre-tax profit income). The argument is that the labour force produces a new value equivalent to its own wage-cost, plus a surplus-value. Karl Heinrich Marx (May 5, 1818, Trier, Germany – March 14, 1883, London) was a German philosopher, political economist, and revolutionary. ...
The value product (VP) is an economic concept formulated by Karl Marx in his critique of political economy during the 1860s, and used in Marxian social accounting theory for capitalist economies. ...
Constant capital, or c, in Marxian political economy is one of the two forms that capital adopts in the workplace, in contrast to variable capital (v). ...
The production of surplus value, from Karl Marxs Capital in Lithographs, by Hugo Gellert, 1934 Surplus value is a concept created by Karl Marx in his critique of political economy, where its ultimate source is claimed to be unpaid surplus labour performed by the worker for the capitalist, serving...
The production of surplus value, from Karl Marxs Capital in Lithographs, by Hugo Gellert, 1934 Surplus value is a concept created by Karl Marx in his critique of political economy, where its ultimate source is claimed to be unpaid surplus labour performed by the worker for the capitalist, serving...
Neoclassical economics regards the incomes constituting added value as the reward for services rendered. In his critique of political economy Marx saw them as results of production under conditions of capitalist exploitation. The Politics series Politics Portal This box: Political economy was the original term for the study of production, the acts of buying and selling, and their relationships to laws, customs and government. ...
The term exploitation may carry two distinct meanings: The act of utilizing something for any purpose. ...
A difference between Marxist theory and conventional national accounts concerns the interpretation of the distinction between new value created, transfers of value and conserved value, and of the definition of "production". Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. ...
For example, Marxist theory regards the "imputed rental value of owner-occupied housing" which is included in GDP as a fictitious entry; if the housing is owner-occupied, this housing cannot also yield real income from its market-based rental value at the same time. Marxism is the political practice and social theory based on the works of Karl Marx, a 19th century philosopher, economist, journalist, and revolutionary, along with Friedrich Engels. ...
In the 1993 manual of the United Nations System of National Accounts (UNSNA), the concept of "imputed rental value of owner occupied housing" is explained as follows:
"6.89. Heads of household who own the dwellings which the households occupy are formally treated as owners of unincorporated enterprises that produce housing services consumed by those same households. As well-organized markets for rented housing exist in most countries, the output of own-account housing services can be valued using the prices of the same kinds of services sold on the market in line with the general valuation rules adopted for goods or services produced on own account. In other words, the output of the housing services produced by owner-occupiers is valued at the estimated rental that a tenant would pay for the same accommodation, taking into account factors such as location, neighbourhood amenities, etc. as well as the size and quality of the dwelling itself. The same figure is recorded under household final consumption expenditures."
Marxist economists object to this accounting procedure on the ground that the monetary imputation made refers to a flow of income which does not exist, because most home owners do not rent out their homes if they are living in them.
Value added tax -
Value added tax (VAT) is a sales tax on value added. It works by being charged on the sale price of goods and services whether purchased by intermediate or final consumers; however intermediate parties can reclaim VAT paid on their inputs, thus ensuring that the net VAT they pay is in effect based on the value added at that particular stage of the process. Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank Money supply Fiscal policy Spending Deficit Debt Trade policy Tariff Trade agreement Finance Financial market Financial market participants Corporate Personal Public Banking Regulation Value added tax (VAT), or goods and services tax (GST), is...
Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank Money supply Fiscal policy Spending Deficit Debt Trade policy Tariff Trade agreement Finance Financial market Financial market participants Corporate Personal Public Banking Regulation Value added tax (VAT), or goods and services tax (GST), is...
References Edgar Z. Palmer, The meaning and measurement of the national income, and of other social accounting aggregates.
M. Yanovsky, Anatomy of Social Accounting Systems.
Anwar Shaikh & Ahmet Ertugrul Tonak, Measuring the Wealth of Nations. CUP.
See also Gross Output is an economic concept used in national accounts such as the United Nations System of National Accounts (UNSNA) and the US National Income and Product Accounts (NIPA). ...
The Gross value added is GDP - taxes on products + subsidies on products = GVA GVA + taxes on products - subsidies on products = GDP See also Measures of national income and output External links GVA - Gross Value Added ...
Intermediate consumption is an economic concept used in national accounts, such as the United Nations System of National Accounts (UNSNA) and the US National Income and Product Accounts (NIPA). ...
Economic Value Added (EVA) is an estimate of true economic profit after making corrective adjustments to GAAP accounting, including deducting the opportunity cost of equity capital. ...
Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. ...
Productive and unproductive labour were concepts used in classical political economy mainly in the 18th and 19th century, which survive today to some extent in modern management discussions, economic sociology and Marxist or Marxian economic analysis. ...
The production of surplus value, from Karl Marxs Capital in Lithographs, by Hugo Gellert, 1934 Surplus value is a concept created by Karl Marx in his critique of political economy, where its ultimate source is claimed to be unpaid surplus labour performed by the worker for the capitalist, serving...
The United Nations System of National Accounts is an international standard system of social accounts, first published in 1953. ...
Value of a product within the context of marketing means the relationship between the consumers expectations of product quality to the actual amount paid for it. ...
Value-added theory (also known as the strain theory) was first proposed by Neil Smelser and is based on the assumption that certain conditions are needed for the development of a social movement. ...
To meet Wikipedias quality standards, this article or section may require cleanup. ...
The value product (VP) is an economic concept formulated by Karl Marx in his critique of political economy during the 1860s, and used in Marxian social accounting theory for capitalist economies. ...
Weblinks - Information and best practices of regional value added in the Alps
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