Cigarettes should be valued in GDP at r₁7.50 per pack, even though r₁5.00 of that price is tax, because the buyers paid r₁7.50 per pack.

Question

Quizplus · Accepted Answer

GDP measures the total value of goods and services produced within a country's borders. When calculating the value of cigarettes in GDP, the total amount paid by the buyers should be considered, including taxes. Therefore, cigarettes should be valued at r₁7.50 per pack in GDP, even though r₁5.00 of that price is tax.

Cigarettes Should Be Valued in GDP at R₁7