sum of value added is equal to sum of factor income ..comment.
Dear Student,
The sum of value added is equal to the sum of factor incomes as both depict the same picture of an economy from two different angles. While the sum of value added presents the total production, the sum of factor incomes depict the income earned by all the factors. In the economy, the producer employs four factors of production to produce final goods and earns revenue by sale, which is equivalent to the total value addition by the firm. The firms pay remunerations to the factors, which act as the income of all the factors. These remunerations are equivalent to the factors’ contributions to the value addition.
Regards
The sum of value added is equal to the sum of factor incomes as both depict the same picture of an economy from two different angles. While the sum of value added presents the total production, the sum of factor incomes depict the income earned by all the factors. In the economy, the producer employs four factors of production to produce final goods and earns revenue by sale, which is equivalent to the total value addition by the firm. The firms pay remunerations to the factors, which act as the income of all the factors. These remunerations are equivalent to the factors’ contributions to the value addition.
Regards