A farmer sells a bushel of wheat to the miller for $1
Value added =$1(selling price) - $0(cost of goods) =$1.
A miller buys the wheat for $1 and sells the flour to the baker for $3 Value added=$3(selling price) - $1(cost of goods) =$2. The baker uses the flour to make bread and sells the bread to the engineer for $6 Value added =$6(selling price) - $3(cost of goods) =$3. Engineer buys the bread for $6 and eat it Value added =$0(no further sale). Therefore; the contribution of the bread to the GDP is the final selling price of the bread which is $6.
8. In economic terms the situation represent a shift from a market transaction to a
non-market transaction. GDP measures the market value of goods and services produced within a country’s boarders. So this change leads to a decrease in GDP. Since the service for a butler provided are not exchanged for wage hence they are not considered in GDP. It is important to know GDP is a measure of economic activity and not wellbeing or happiness hence marriage can lead to increased wellbeing for the couple which is not considered by GDP.