Product method

Product method - garments as final products, plus the value...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Product method: Under this method the market values of all goods and services produced are aggregated to arrive at the national income value. If proper records are maintained of every small and private productive activity then this method should provide satisfactory information. But this method has limited significance since it suffers from certain drawbacks. First, under product method care has to be taken to include values of the final products . The values of intermediate products should be excluded in order to avoid double counting. For instance, if we consider the case of garment manufacturing industry; the raw materials pass through various stages before it is transformed into the final product. These include production of cotton thread, cloth and garments . Therefore we have to include in the national income only the value of the ready-made
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: garments as final products, plus the value of some amount of cotton thread and cloth which might have been used for direct consumption. Second, the product method emphasizes production of tangible goods. Therefore it is possible that useful services such as those of teachers, musicians etc. get excluded or underestimated. Third, under product method, part of the goods produced such as grains, vegetables, fruit etc. may not be marketed at all but used for self-consumption by the household members of the producers. Evaluating the contribution of non-marketed products and to add this to the national income becomes a difficult task. Hence the value of this method is limited....
View Full Document

Ask a homework question - tutors are online