Suppose a consumer buys a Perfect Pizza frozen cheese pizza at the grocery store for $10. Perfect Pizza purchased the dough and tomato sauce from a food-processing company for $2 and bought the cheese for $1. It sold the pizza to the store for $5. How much has GDP increased?
A) $2
B) $5
C) $10
D) $18

Question

Quizplus · Accepted Answer

GDP measures the final value of goods and services produced, so the value of the pizza at the final point of sale (when the consumer buys it) is what should be counted. In this case, the final sale price was $10, which is $5 more than the price Perfect Pizza sold it to the store for. Therefore, GDP has increased by $10. The costs of the inputs and intermediate goods are not relevant to GDP as they have already been included in the final sale price.

Suppose a Consumer Buys a Perfect Pizza Frozen Cheese Pizza