Adjustment Of Measures From Market Prices To Basic Prices
Economics notes
Adjustment Of Measures From Market Prices To Basic Prices
➡️ Basic prices are used to measure the value of goods and services produced in an economy, as they exclude taxes and subsidies. This allows for a more accurate comparison of the value of goods and services across different countries.
➡️ Adjusting measures from market prices to basic prices can help to identify the true economic value of a product or service, as it eliminates the effects of taxes and subsidies. This can be useful for policy makers when making decisions about economic policy.
➡️ Adjusting measures from market prices to basic prices can also help to identify the true cost of production, as it eliminates the effects of taxes and subsidies. This can be useful for businesses when making decisions about pricing and production costs.
What is the difference between market prices and basic prices in economics?
Market prices refer to the prices of goods and services that are actually paid by consumers in the market. Basic prices, on the other hand, are the prices that producers receive for their goods and services, excluding any taxes or subsidies. The adjustment of measures from market prices to basic prices is important in order to accurately measure the value added by each sector of the economy.
Why is it necessary to adjust measures from market prices to basic prices?
The adjustment of measures from market prices to basic prices is necessary because market prices do not reflect the true value added by each sector of the economy. For example, if a sector receives a subsidy, the market price of its goods and services will be lower than the basic price. Similarly, if a sector pays a tax, the market price will be higher than the basic price. By adjusting measures to basic prices, economists can accurately measure the contribution of each sector to the economy.
How does the adjustment of measures from market prices to basic prices affect economic analysis?
The adjustment of measures from market prices to basic prices is important for accurate economic analysis. It allows economists to measure the true value added by each sector of the economy, which is important for understanding the overall performance of the economy. For example, if a sector receives a large subsidy, its market price may be low, but its contribution to the economy may be significant. By adjusting measures to basic prices, economists can accurately measure the contribution of each sector and make informed policy decisions.