Gross Domestic Product etc - 33

Factor Cost and Market Prices

3.16 Production and the income method measures domestic product at the
cost paid to the factor of production and is known as domestic product at
factor cost. However, at the point of expenditure, the value of the product is
normally at market prices i.e. at the actual prices which either the consumers
or the producers pay for purchase of goods and services, whether for
consumption or for capital formation. This measurement of domestic product
through the expenditure side is known as domestic product at market prices.
This market value of the final expenditure would exceed the total obtained at
factor cost by the amount of indirect taxes levied by the Government less the
value of subsidies given by the Government to producers. The domestic
product can, therefore, be measured either at factor cost or at market prices,
one differing from the other by the amount of net indirect taxes (i.e. indirect
taxes less subsidies). However, the State DESs are presently measuring the
SDP and DDP only at factor cost, in the absence of compilation of SDP/DDP
by the expenditure method.[Reproduced from CSO Publication]