• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

April 2004 q14

J

John H

Member
In a simple closed economy.

Sales = £1 million
Buy raw materials = £400,000
Electricity costs = £100,000
Depreciation of capital equipment = £200,000

Contribution to GDP via the output method is:

Sales - costs of intermediate goods = 1 million - 400,000 = 600,000

The answer is £500,000, so obviously deducts electricity costs but why? Electricity is not an intermediate good is it?

Can anyone shed some light on this??
 
Electricity is an intermediate good in this situation. If you think about the value of the final good produced it will take the electricity cost into account, so I think in this instance electricity is an intermediate good.

Electricity supplied to the end user (consumer) will be considered 'final' goods.
 
Back
Top