The table given below reports the sales value at each stage of production of the soft drink Pepsi.
Table 5.3
$\begin{array}{|l|c|}
\hline {\text { Production Stage }} & \text { Sales Value } \
\hline \text { Sugar cane } & \$ 0.05 \
\hline \text { Processed sugar } & \$ 0.10 \
\hline \text { Wholesale Pepsi } & \$ 0.40 \
\hline \text { Pepsi in a vending machine } & \$ 0.60 \
\hline
\end{array}$
-Refer to Table 5.3. Compute GDP according to the income approach if Pepsi is assumed to be the only good produced in the economy.

Question

The table given below reports the sales value at each stage of production of the soft drink Pepsi.
Table 5.3
 $\begin{array}{|l|c|}
\hline  {\text { Production Stage }} & \text { Sales Value } \
\hline \text { Sugar cane } & \$ 0.05 \
\hline \text { Processed sugar } & \$ 0.10 \
\hline \text { Wholesale Pepsi } & \$ 0.40 \
\hline \text { Pepsi in a vending machine } & \$ 0.60 \
\hline
\end{array}$
-Refer to Table 5.3. Compute GDP according to the income approach if Pepsi is assumed to be the only good produced in the economy.

Quizplus · Accepted Answer

GDP according to the income approach is the sum of all income generated in the production of goods and services. In this case, we have four stages of production before the final sale of Pepsi in a vending machine.

The sales value at each stage of production are:
- Sugar cane: $0.05
- Processed sugar: $0.10 (total value added at this stage is $0.10 - $0.05 = $0.05)
- Wholesale Pepsi: $0.40 (total value added at this stage is $0.40 - $0.10 = $0.30)
- Pepsi in a vending machine: $0.60 (total value added at this stage is $0.60 - $0.40 = $0.20)

Therefore, the total value added in the production of Pepsi is $0.05 + $0.05 + $0.30 + $0.20 = $0.60, which is the GDP according to the income approach. So, the correct answer is D).

The Table Given Below Reports the Sales Value at Each