Value Added Calculation in a Cotton Shirt Production Chain
In a simplified economy producing a cotton shirt, the production chain involves several stages. Raw cotton is sold for $50, processed into cloth sold for $80, and finally made into a shirt sold to a consumer for $100. The value added at each stage is calculated as follows: the raw cotton industry adds $50; the cloth industry adds $30 (by transforming the $50 of cotton into $80 of cloth); and the shirt industry adds $20 (by turning the $80 of cloth into a $100 shirt). The sum of the value added across all industries is $50 + $30 + $20 = $100, which is identical to the final sale price of the shirt.
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Introduction to Macroeconomics Course
Ch.3 Aggregate demand and the multiplier model - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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Learn After
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