Question

What is the relation between net national product at market price and net national product at factor cost

Answer 1

Dear Student,

The relationship beholds between the two in the following manner:
Net National Product at Market Price – Indirect Taxes = Net National Income at Factor Cost

​​​Goods produced are sold at market prices which include the indirect taxes imposed by the Government. Indirect taxes are levied on commodities, such as GST. Thus, the market value of the national product exceeds the income paid to the factors of production by the amount of indirect taxes. Hence, net national income at factor cost shows the income actually received by the factors of production.

Regards.