INTERNAL ASSIGNMENT

1. Gross Domestic Product (GDP) and Gross National Product (GNP).

GDP is the sum of money value of all goods and services produced within the domestic territories of a
country during an accounting year.

It includes income from exports and payment made on imports during the year.

GDP = C + I + G + (X – M) or,

GDP = Consumption + Investment + Government Expenditure + (Exports - Imports)

GNP measures the levels of production of all the citizens or corporations from a particular country working
or producing in any country.

For example, the American GNP measures and includes the production levels of any American or
American-owned entity,

regardless of where in the world the actual production process is taking place, and defines the economy in
terms of the citizens output.

GNP=GDP + Net factor income from abroad

Net factor income from abroad is the difference between the factor income earned from abroad by normal
residents of a country (say, India) and the factor income earned by non-residents (foreigners) in the
domestic territory of that country (i.e., India).

Problem: 2

Qd= 1200-P
Qs= 120+3P.
Find equilibrium price
if price changes to Rs 400 and Rs 120. What is new equilibrium price ?

1200-P = 120+3P
Solving the above
4P = 1080
Hence Equilibrium price P = Rs 270

When price Rises to Rs 400

Qs=120 + (3×400)
Qs = 1320
and
Qd = 1200 - 400 = 800

When Price rises to Rs 120

Qs = 120 + (3 × 120)
Qs = Rs 480
And
Qd = 1200 - 120 = Rs 1080

Problem 3:

Price elasticity of demand

is a measure of a change in the quantity demanded of a product due to

change in the price of the product in the market. In other words, it can be
defined as the ratio of the percentage change in quantity demanded to the
percentage change in price. It can be mathematically expressed as:

PercentageChange in theQuantity Demanded

Price elasticity of demand 
PercentageChange in Price