The value added for each agent in the economy is as follows
Intelligence incorporated: 100 x 200 = 20,000
Bell: 800*100 - 20,000 - 50 x 100 = 55,000
PC Charlie's: 1000 x 100 - 800 x 100 = 20,000
GDP = 20,000 + 55,000 + 20,000 = $95,000
What is the value-added method?
- Total value added is determined in business by tabulating the unit value added for each sold unit of a product. Thus, revenue less intermediary consumption equals the total value added.
- Total value added is very closely approximated by employee compensation, which represents a return to labor, plus earnings before taxes, which represents a return to capital.
- Value added is a higher percentage of revenue for integrated companies and a lower percentage of revenue for less integrated companies.
- The word "value added" in economics, and more especially macroeconomics, refers to the contribution made by the factors of production to improve the product's value and the income of people who own those factors.
- As a result, both labor and capital contribute to the national value added.
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