Page 214 - DECO405_MANAGERIAL_ECONOMICS

Unit 13: Basic National Income Concepts

We, therefore, have the following identities Notes
PI = DI + T
DI = C + S
It follows
PI = C + S + T

Notes The concept of value added is a useful device to find out the exact amount that
is added at each stage of production to the value of the final product. Value added can be
defined as the difference between the value of output produced by that firm and the total
expenditure incurred by it on the materials and intermediate products purchased from
other business firms. Thus, value added is obtained by deducting the value of material
inputs or intermediate products from the corresponding value of output.

Value added = Total sales + Closing stock of finished and semi-finished goods – Total
expenditure on raw materials and intermediate products – Opening stock of finished and
semi-finished goods

Caselet Smoking Costs over 6.5% of National Income to
Nations

ove for nicotine is weighing heavily on developing nations with top ten smoker
countries losing more than $30 billion annually which is more than 6.5 per cent of
Ltheir gross national income (GNI).
The top ten smokers countries, identified by Forbes magazine include Kenya, Turkey,
Namibia, Yemen, Guinea, Bosnia and Herzegovina, Serbia and Montenegro, Mongolia,
Nauru and Sao Tome and Principe.
Thanks to celebrity activism and widespread media attention, the magazine notes, HIV,
malaria and starvation are well-known diseases of the third world. But there's another
resource-draining plague afflicting these countries - smoking.

While the smoking population is half what it was a generation ago in the US and other
industrialised nations, with only one in five using tobacco, it's different in Africa and East
Asia, where time stands still when it comes to cigarettes, it says.

Smoking rates of 40 per cent or more of the population are common in these regions and
medical services are limited.
In Turkey, for example, 44 per cent of its 71.5 million population smokes, draining USD
22.4 billion annually which accounts for 5.8 per cent of its GNI of 384.3 billion dollars.
Around 45 per cent of Yemen's population smokes costing $1 billion to its economy
annually and accounts for 6.2 per cent of GNI.
Societal costs in those countries, Forbes says, can't be calculated the same way they would
be in the US, where most studies measure how much smokers burden taxpayers with extra
medicare and medicaid payments.
For poor countries, there is no medicare-like programme to fund. Nor is there enough
data about the economic impact of other diseases to make real comparisons. Contd...

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