DECEMBER 2021 P/ID 77505/PMBE/

PMB1E/PMBSE
Time : Three hours Maximum : 100 marks
PART A — (5 × 6 = 30 marks)
Answer any FIVE questions.

1. Describe the concept of price elasticity of demand.

The Concept of Price Elasticity of Demand!

Price elasticity of demand indicates the degree of responsiveness of quantity

demanded of a good to the change in its price, other factors such as income, prices
of related commodities that determine demand are held constant. Precisely, price
elasticity of demand is defined as the ratio of the percentage change in quantity
demanded of a commodity to a percentage change in price. Thus eP = Percentage
change in quantity demanded/Percentage change in price. Thus

ep = Percentage change in quantity demanded/ Percentage change in Price.

It follows from the above definition of price elasticity of demand that when the
percentage change in quantity demanded a commodity is greater than the percentage
change in price that brought it about, price elasticity of demand (ep) will be
greater than one and in this case demand is said to be elastic.

On the other hand, when a given percentage change in price of a commodity leads to
a smaller percentage change in quantity demanded, elasticity will be less than one
and demand in this case is said to be inelastic. Further, when the percentage
change in quantity demanded of a commodity is equal to the percentage change in
price that caused it, price elasticity is equal to one.

Thus in case of elastic demand, a given change in price causes quite a large change
in quantity demanded. And in case of inelastic demand, a given change in price
brings about a very small change in quantity demanded of a commodity.

It is a matter of common knowledge and observation that there is a considerable

difference between different goods in regard to the magnitude of response of demand
to the changes in price. The demand for some goods is more responsive to the
changes in price than those for others.

2. What is Oligopoly?

An oligopoly is a market structure that involves a small group of large companies

that have all or almost all sales in the industry and often collude to reduce
competition. The level of competition among firms within this market system is
lower while companies have monopoly power and obtain higher revenue.

Many purchases that individuals make at the retail level are produced in markets
that are neither perfectly competitive, monopolies, nor monopolistically
competitive. Rather, they are oligopolies. Examples of oligopoly abound and include
the auto industry, cable television, and commercial air travel. Oligopolistic firms
are like cats in a bag. They can either scratch each other to pieces or cuddle up
and get comfortable with one another. If oligopolists compete hard, they may end up
acting very much like perfect competitors, driving down costs and leading to zero
profits for all. If oligopolists collude with each other, they may effectively act
like a monopoly and succeed in pushing up prices and earning consistently high
levels of profit. Oligopolies are typically characterized by mutual interdependence
where various decisions such as output, price, advertising, and so on, depend on
the decisions of the other firm(s). Analyzing the choices of oligopolistic firms
about pricing and quantity produced involves considering the pros and cons of
competition versus collusion at a given point in time.

3. Explain the theory of profit.

In economics, profit is called pure profit, which may be defined as a residual left
after all contractual costs have been met, including the transfer costs of
management insurable risks, depreciation and payment to shareholders, sufficient to
maintain investment at its current level.

Profit is the financial benefit realized from the business activity when the
revenues generated exceeds the costs and expenses incurred in the operation of such
activities. Simply, the total cost deducted from total revenue yields profit.

1. Walker’s Theory of Profit as Rent of Ability

This theory is pounded by F.A. Walker. According to Walker, “Profit is the rent of
exceptional abilities that an entrepreneur may possess over others”. Rent is the
difference between the yields of the least and the most efficient entrepreneurs.

2. Clark’s Dynamic Theory

This theory is propounded by J.B. Clark. According to him, “Profits arise in a
dynamic economy and not in static economy.”

The major function of entrepreneurs or managers in a dynamic economy is to take the

advantage of all of the above features and promote their business by expanding
their sales and reducing their costs of production.

3. Hawley’s Risk Theory of Profit

The risk theory pf profit is propounded by F.B. Hawley in 1893. Risk in business
may arise due to obsolescence of a product, sudden fall in prices, non-availability
of certain materials, introduction of a better substitute by a competitor and risks
due to fire, war, etc. Hawley’s considered risk taking as an inevitable element of
production and those who take risk are more likely to earn larger profits.

4. Knight’s Theory of Profit

This theory of profit is propounded by Frank H. Knight who treated profit as a
residual return because of uncertainly, and not because of risk bearing. Knight
made a distinction between risk and uncertainly by dividing risk into two
categories, calculable and non-calculable risks.

5. Schumpeter’s Innovation Theory of Profit

According to Schumpeter, factors like emergence of interest and profits, recurrence
of trade cycles only supplement the distinct process of economic development.

4. What is cost Benefit Analysis? Explain the steps

involved in it.

Cost-Benefit Analysis involves adding up the benefits of a course of action, and

then comparing these with the costs associated with it.

The results of the analysis are often expressed as a payback period – this is the
time it takes for benefits to repay costs. Many people who use it look for payback
in less than a specific period – for example, three years.

Steps involved here are:-

>>Set the framework for the analysis. Specify the program or policy change and the
current status quo, or the state of the world before implementation compared to
after.
>>Decide whose costs benefits should be recognized. You need to determine the
geographic scope of the analysis in order to limit the groups impacted by the
policy.
>>Identity and categorize costs and benefits. It is important to label costs and
benefits as direct (intended costs/benefits)/indirect (unintended costs/benefits),
tangible (easy to measure and quantify)/intangible (hard to identify and measure),
and real (anything that contributes to the bottom line net-benefits)/transfer
(money changing hands) in order to ensure that you understand the effects of each
cost and benefit.
>>Project costs and benefits over the life of the program. Assess how costs and
benefits will change each year. It is important to do this even before you begin to
place numbers on things.
>>Monetize costs. Make sure to place all costs in the same unit.
>>Monetize benefits. Make sure to place all benefits in the same unit.
>>Discount costs and benefits to obtain present values. This means converting
future costs and benefits into present value. This is also known as the social
discount rate, or the rate at which society makes tradeoffs over time. Every agency
tends to have a different discount rate. It generally ranges between 2-7%.
>>Compute net present values. This is done by subtracting costs from benefits. The
policy is considered efficient if a positive result is produced; however, it is
important to think about the policy’s feasibility and social justice.
>>Perform sensitivity analysis. This step allows you to check the accuracy of your
estimates and assumptions. This is normally done by altering the social discount
rate utilized, by increasing it and decreasing it. If you still get a positive
number during this step, then the policy should be accepted. If you get a negative
number during this step, then you should calculate where the balancing point is
zero.
>>Make a recommendation. Assess all results and account for other qualitative
considerations.

5. Can government intervention will help in

controlling monopolies and regulating prices?

6. Explain the term disinvestment with examples.

Disinvesting is a strategy by which an investor offloads or disposes of an asset or
a partial stake in the asset. Disinvesting is an exit strategy that means taking
out an existing investment. Disinvestment policies are commonly followed by
governments to allocate resources more efficiently. For example, the Indian
government recently announced that they will carry out disinvestment in BPCL, a
government oil and gas subsidiary.

Disinvestment by the government means the market activity through which the
Government conducts sale or liquidation of Government-owned assets. Such assets
usually refer to the Government’s ownership stake in Central Public Sector
Enterprises (CPSEs) and state public sector enterprises (SPSEs), but are not
limited to that. Government assets also include project undertakings and other
fixed assets.
Examples:

Air India Disinvestment: The Government offered to sell a 76 percent stake in the
state-owned airliner in 2018. However, it could not receive a successful bid then.
The Government reopened their process this year in January, this time with
intention of disinvesting completely.

The disinvestment will involve a 100 percent sale of the Government’s shareholding
in the company, including Air India Express Limited and Air India SATS Airport
Services. The issue at hand is that the company is neck-deep in debt.

Life Insurance Corporation of India: The Government announced the disinvestment in

the largest insurer of the country this year. LIC holds approximately 69 percent of
the market share. LIC disinvestment is a unique case as disinvestment in the state-
owned insurer will demand amendments to the LIC Act. LIC Act governs several
operations of the company, such as the transfer of surpluses, government guarantee
on policies, etc.

BPCL Disinvestment – In November 2019, the government of India announced the

disinvestment of 5 public sector units (PSUs), which included cutting the majority
stake in Bharat Petroleum Corporation of India (BPCL) and Shipping Corporation of
India (SCI). Along with these two PSUs, the government also announced its 31% stake
sale plans in Container Corporation of India (CONCOR).

Shipping Corporation of India (SCI) – The government on 22nd December 2020 invited
bids to sell its 63.75 percent stake in SCI, along with transfer of the management
control. The deadline to submit the initial bid had been set for 13th February
2021. The stock has zoomed around 75 percent over November 2020, on reports that
several domestic and global players are in the fray to participate in the
privatization process.

7. Explain Fiscal policy.

8. State and explain the Law of Diminishing

Marginal Returns.

PART B — (5 × 10 = 50 marks)
Answer any FIVE questions.

9. What are the various determinants of demand?

Explain.

The 5 Determinants of Demand

The five determinants of demand are:

1.The price of the good or service

2.The income of buyers
3.The prices of related goods or services—either complementary and purchased along
with a particular item, or 4.substitutes bought instead of a product
5.The tastes or preferences of consumers will drive demand
Consumer expectations about whether prices for the product will rise or fall in the
future
For aggregate demand, the number of buyers in the market is the sixth determinant.

Explained for your references:---

1.Price
The law of demand states that when prices rise, the quantity of demand falls. That
also means that when prices drop, demand will grow. People base their purchasing
decisions on price if all other things are equal. The exact quantity bought for
each price level is described in the demand schedule. It's then plotted on a graph
to show the demand curve.

Note:The demand curve shows just the relationship between price and quantity. If
one of the other determinants changes, the entire demand curve shifts.

If the quantity demanded responds a lot to price, then it's known as elastic
demand. If demand doesn't change much, regardless of price, that's inelastic
demand.

2.Income
When income rises, so will the quantity demanded. When income falls, so will
demand. But if your income doubles, you won't always buy twice as much of a
particular good or service. There are only so many pints of ice cream you'd want to
buy, no matter how wealthy you are, and this is an example of "marginal utility."

Important:Marginal utility is the concept that each unit of a good or service is a

little less useful to you than the first. At some point, you won’t want it anymore,
and the marginal utility drops to zero.

The first pint of ice cream tastes delicious. You might have another. But after
that, the marginal utility starts to decrease to the point where you don't want any
more.

3.Prices of Related Goods or Services

The price of complementary goods or services raises the cost of using the product
you demand, so you'll want less. For example, when gas prices rose to $4 a gallon
in 2008, the demand for gas-guzzling trucks and SUVs fell.2 Gas is a complementary
good to these vehicles. The cost of driving a truck rose along with gas prices.

The opposite reaction occurs when the price of a substitute rises. When that
happens, people will want more of the good or service and less of its substitute.
That's why Apple continually innovates with its iPhones and iPods. As soon as a
substitute, such as a new Android phone, appears at a lower price, Apple comes out
with a better product. Then the Android is no longer a substitute.

4.Tastes
When the public’s desires, emotions, or preferences change in favor of a product,
so does the quantity demanded. Likewise, when tastes go against it, that depresses
the amount demanded. Brand advertising tries to increase the desire for consumer
goods.

5.Expectation:
If consumers suspect that the price of a product will rise in future, the demand
for said product will increase in the present. For example, if there is a rise in
petrol prices forecast for the coming week, motorists will fill up today. Equally,
customers’ attitudes, tastes, and preferences can impact demand in ways less
directly associated with cost. For instance, if a popular celebrity is involved in
marketing a product, demand may increase. Conversely, if a scientific study reports
a product is detrimental to your health, demand will drop.High expectation of
income or expectation in the increase in price of a good also leads to an increase
in demand. Similarly, low expectation of income or low pricing of goods will
decrease the demand.

Number of Buyer in the Market:

If there is an increase in the number of buyers willing to buy goods or services
affects the overall demand. The population has a large influence on the market.
Population increase can create a makeshift in the demand curve.

The new buyers help raise the quantity demand, so demand changes even if the price
does not change.

10. What are the different steps involved in project

evaluation? Explain.

Project evaluation is a strategy used to determine the success and impact of

projects, programs, or policies. It requires the evaluator to gather important
information to analyze the process and outcome of a certain project. Project
evaluation prompts changes in internal workflow, detects patterns in the target
audience of the project, plans for upcoming projects or reports the value of
projects to external stakeholders.

1. Create an evaluation plan

Create goals and objectives as you develop your project to provide structure and a
clear trajectory for your team. These goals and objectives also help you determine
which type of project evaluation you want to carry out. Your evaluation plan
includes as many tools and methods as you deem necessary for the type of evaluation
you choose. For example, if one goal is to increase employee productivity,
analyzing metrics of task completion is a tool of evaluation that shows growth in
productivity rates.

2. Identify the source of evaluation and get organized

Once you have decided on an evaluation plan, identify the sources of information.
If you decided to conduct interviews, select all the people you want to interview.
It is important to gather all the materials you need for each method, such as
interview questions and a place to track and store responses. Delegate tasks or
make a detailed timetable to further prepare for the implementation of your
evaluation plan.

3. Implement the project evaluation

Implementing your evaluation plan may look different based on both the type of
evaluation and the methods or tools you chose. The following is a list of what to
focus on when implementing evaluations:

Pre-project evaluation: For a pre-project evaluation, try to focus on developing

objectives and goals and evaluating the viability of the project.
Ongoing evaluation: If you are conducting an ongoing evaluation, you may monitor
details like schedule, budget and quality of work.
Post-project evaluation: A post-project evaluation measures the project's success
based on both impact and outcome.

4. Analyze the data

After gathering all the data for your evaluation, analyze the data for trends,
strengths and weaknesses, and how closely the project adhered to the goals and
objectives. Depending on the type of data you gathered, use a tracking system for
organization and storage. Then, use your team's goals and objectives to interpret
the data you collected.

5. Develop a report for your team

Along with interpreting the data you collected, develop a report summarizing the
results of the evaluation. Structure this report according to the needs of your
team and stakeholders. This practice is valuable since the report might highlight
areas that need improvement, showcase the intended and unintended impacts of the
project and measure the extent to which your team met the goals and objectives.

6. Discuss next steps

Once your report is complete, it is ready to share with team members and
stakeholders. Sharing the results of the project evaluation strengthens
communication, prompts innovative suggestions for team improvement, builds stronger
relationships with stakeholders, and guides on how to improve upcoming projects. By
relaying the results of the project evaluation, a discussion begins about how to
move forward based on the outcomes and impact of the project.

11. State and explain the ‘Law of variable

proportions’.

Law of Variable Proportion is regarded as an important theory in Economics. It is

referred to as the law which states that when the quantity of one factor of
production is increased, while keeping all other factors constant, it will result
in the decline of the marginal product of that factor.

Law of variable proportion is also known as the Law of Proportionality. When the
variable factor becomes more, it can lead to negative value of the marginal
product.

The law of variable proportion can be understood in the following way.

When variable factor is increased while keeping all other factors constant, the
total product will increase initially at an increasing rate, next it will be
increasing at a diminishing rate and eventually there will be decline in the rate
of production.

Assumptions of Law of Variable Proportion

Law of variable proportion holds good under certain circumstances, which will be
discussed in the following lines.

Constant state of Technology: It is assumed that the state of technology will be

constant and with improvements in the technology, the production will improve.
Variable Factor Proportions: This assumes that factors of production are variable.
The law is not valid, if factors of production are fixed.
Homogeneous factor units: This assumes that all the units produced are identical in
quality, quantity and price. In other words, the units are homogeneous in nature.
Short Run: This assumes that this law is applicable for those systems that are
operating for a short term, where it is not possible to alter all factor inputs.

Stages of Law of Variable Proportion

The Law of Variable proportions has three stages, which are discussed below.

First Stage or Stage of Increasing returns: In this stage, the total product
increases at an increasing rate. This happens because the efficiency of the fixed
factors increases with addition of variable inputs to the product.
Second Stage or Stage of Diminishing Returns: In this stage, the total product
increases at a diminishing rate until it reaches the maximum point. The marginal
and average product are positive but diminishing gradually.
Third Stage or Stage of Negative Returns: In this stage, the total product declines
and the marginal product becomes negative.
This concludes the topic of Law of Variable Proportions, which is an important
concept for the students of Commerce.

12. Justify the need for Government Intervention in

the working of market. In what ways, can
Government intervene?

13. What is general equilibrium? Explain in detail.

14. Define Managerial Economics. Explain its scope

and importance for managerial decisions.

15. Describe the nature, scope and practical

significance of Managerial Economics.

https://theintactone.com/2019/10/13/me-u1-topic-1-nature-scope-and-significance-of-
managerial-economics/

16. How Pricing is done under imperfect competition?

Explain.

Pricing in Imperfect Competition

Imperfect competition emerges in situations where there is neither pure competition

nor pure monopoly. The situation of imperfect competition is the real world that
lies between these two extremes. Imperfect competition may be in several forms.

We can not define imperfect competition in a single case there are various
situations representing imperfect competition. Here, we shall understand the Price
Determination under Imperfect Competition.

Monopoly
There is only one firm prevailing in a particular industry called A Monopoly Market
Structure. When a single firm controls 25% or more of a particular market is known
as monopoly power from a regulatory view. Indian Railway is an example.

A Natural Monopoly Market Structure comprises various natural advantages like

strategic location and/or abundant mineral resources.

Various gulf countries have a monopoly in crude oil exploration because of abundant
naturally occurring oil resources.

Key features of a Monopoly Market Structure

1. Lack of Substitutes
In monopoly structure firms normally produce a good without close substitutes. The
product is generally often specific and unique.

For example, when Apple started producing the iPad, it arguably had a monopoly over
the tablet market.

2. Barriers to Entry
There are significant barriers exists to entry set up by the monopolist. If new
firms want to enter the industry, the monopolist will not have complete control of
a firm on the supply.

This implies that there is no difference between a firm and an industry Under
monopoly.

3. Competition
In a monopoly market structure, there are no close competitors in the market for
that product.

4. Price Maker
The term Price Determination under Imperfect Competition symbolizes monopoly
market. The monopolistic sets the price of the product. Since it has market power,
This power makes the monopolist a price maker.

5. Profits
A monopolist can maintain supernormal profits in the long run but it not necessary
that he earns profits too. He can be making a loss or maximizing revenues. This can
never happen under perfect competition.

In the case where the abnormal profits are available in the long run, other firms
will also enter the market and as a result, abnormal profits will be eliminated.

Monopolistic Competition

Monopolistic competition is a market structure which has elements of both monopoly

and competitive markets.

Essentially a monopolistic competitive market provides freedom of entry and exit,

but sellers can differentiate their products. They can set prices because they have
an inelastic demand curve.

However, since there is freedom of entry, supernormal profits may encourage more
firms to enter the market leading to normal profits in the long term.

The diagram for a monopolistic competition is the same as for a monopoly in the
short run.
Supernormal profit encourages new firms to enter in the long run. This reduces
existing demand for existing firms and leads to normal profit.

The efficiency of firms in monopolistic competition

Key features of a Monopolistic Competitive Industry

There are many firms.
Freedom of entry and exit.
Firms manufacture differentiated goods.
Firms have price inelastic demand, therefore, they are price makers because the
good is highly differentiated.
They earn normal profits in the long run but could make supernormal profits in the
short term.
Dynamic efficiency is possible as firms have excess profit to invest in research
and development.
In a monopolistic competitive industry, this is possible the firm does face
competitive pressures to cut cost and provide better products.

Examples of Monopolistic Competition

Restaurants – Generally restaurants compete on quality and as much as the price of
food. Product differentiation is a key element of the restaurant business. There
are relatively low barriers to entry in opening a new restaurant.
Saloon-A service which provides a reputation to firms for the quality of their
hair-cutting.
Fashion Industry-In cloths industry, designer label clothes are about the brand and
product differentiation.
TV programmes – Around the world globalization has increased the diversity of
television programmes from networks. Consumers can choose programs between domestic
channels and also imports from other countries such as Netflix.

PART C — (1 × 20 = 20 marks)
Compulsory
17. How National income is calculated? What are the
methods and tools used for its Estimation?
Explain.

National income is referred to as the total monetary value of all services and
goods that are produced by a nation during a period of time. In other words, it is
the sum of all the factor income that is generated during a production year.

National income serves as an indicator of the nation’s economic activity. It can be

calculated by three methods such as income method, value-added method, and
expenditure method.

Income method is mainly based on the incomes generated by the factors of production
such as labour and land. The expenditure method is based on investment and
consumption, while the value-added method is mostly based on the value added to a
product during the stages of production.

Formula for National Income

National income = C + G + I + X + F – D

Where,
C denote the consumption

G denote the government expenditure

I denote the investments

X denote the net exports (Exports subtracted by imports)

F denote the national resident’s foreign production

D denote the non-national resident’s domestic production

The methods are: 1. The Product (Output) Method 2. The Income Method 3. The
Expenditure Method.

Gross Domestic Product

The total value of output in an economy is the Gross Domestic Product (GDP) and is
used to measure economic activity changes. GDP encompasses the production of
foreign-owned enterprises located in a country following the foreign direct
investment.

There are three different ways to calculate GDP that should all add up to the same
amount: The national output is equal to national expenditure (Aggregate demand)
which in turn is equal to national income.

The equation for GDP using this approach is

GDP = C(Household spending) + I(Capital investment spending) + G(Government

spending) + (X(Exports of Goods and Services)-M(Imports of Goods and Services)

The three different ways to measure GDP are - Product Method, Income Method, and
Expenditure Method.

These three calculating GDP methods yield the same result because National Product
= National Income = National Expenditure.

The Product Method:

In this method, all goods and services produced during the year in various
industries are added up. This is also known as value-added to GDP or GDP at the
sector of origin's cost factor. India includes the following items: agriculture and
allied services; mining; development, construction, the supply of electricity, gas,
and water, transport, communication, and trade; banking and industrial real estate
and property ownership of residential and commercial services and public
administration and defence and other services (or government services). It is, in
other words, the amount of the added gross value.

The Income Method:

In a nation that produces GDP during a year, people earn income from their jobs.
Thus the sum of all factor incomes is GDP by revenue method: wages and salaries
(employee compensation) + rent + interest + benefit.

Expenditure Method:

This approach focuses on products and services generated during one year within the
region.

GDP is subtracted from the portion of consumption, investment, and government

spending expended on imports. Likewise, all manufactured components, such as raw
materials used in the manufacture of products for sale, are also exempt.

Thus GDP by expenditure method at market prices is net export, which can be
positive or negative.

GDP at Factor Cost:

GDP is the amount of net value added by all producers within the country at the
cost factor. Since the net value added is allocated as revenue to the owners of
production factors, the sum of domestic factor incomes and fixed capital
consumption is GDP (or depreciation).

Thus,

GDP at Factor Cost is equal to the sum of Net value added and Depreciation.

GDP at factor cost includes -

Compensation of employees, i.e., wages, salaries, etc.

Operational surplus, which is both incorporated and unincorporated companies'

business profit.

Mixed-Income of Self- employed.

Net Domestic Product (NDP):

The NDP is the value of the economy's net production throughout the year. During
the manufacturing process, some of the country's capital equipment wears out or
becomes redundant each year. A certain percentage of the gross expenditure removed
from GDP is the amount of this capital consumption.

Net Domestic Product = GDP at the expense of Factor - Depreciation

Nominal and Real GDP:

It is referred to as GDP at current prices or nominal GDP when GDP is calculated

based on the current price. On the other hand, if GDP is measured in a given year
based on fixed costs, it is referred to as GDP at constant prices, or actual GDP.

Nominal GDP is the value of the goods and services produced in a year, calculated
at the current market) prices in terms of rupees (money).

Three Important Methods for Measuring National Income

There are three techniques to compute national income:

Income Method

Product/ Value Added Method

Expenditure Method

Income Method
National income is calculated using this method as a flow of factor incomes. Labor,
capital, land, and entrepreneurship are the four main components of production.
Labour is compensated with wages and salaries, money is compensated with interest,
the land is compensated with rent, and entrepreneurship is compensated with profit.

Furthermore, certain self-employed individuals, such as doctors, lawyers, and

accountants, use their own labour and capital. Their earnings are classified as
mixed-income. NDP at factor costs is the total of all of these factor incomes.

National Income is calculated as a flow of income in this case.

NI can be calculated as follows:

Employee compensation + Operating surplus (w + R + P + I) + Net income + Net factor

income from overseas = Net national income.

Where,

Wage stands for wage and salaries

R stands for rental income.

P stands for profit.

I stand for mixed-income.

Product/ Value Added Method

National income is calculated using this method as a flow of goods and services.
During a year, we determine the monetary value of all final goods and services
generated in an economy. The term "final goods" refers to goods that are consumed
immediately rather than being employed in a subsequent manufacturing process.

Intermediate goods are goods that are used in the manufacturing process. Because
the value of intermediate products is already included in the value of final goods,
we do not count the value of intermediate goods in national income; otherwise, the
value of goods would be double-counted.

To avoid duplicate counting, we can use the value-addition approach, which

calculates value-addition (i.e., the value of the end good plus the value of the
intermediate good) at each stage of production and then adds them together to get
GDP.

The sum-total is the GDP at market prices since the money value is measured at
market prices. The methods outlined before can be used to convert GDP at market
price.

The flow of goods and services is used to calculate national income.

NI can be calculated as follows:

G.N.P. - COST OF CAPITAL – DEPRECIATION – INDIRECT TAXES = NATIONAL INCOME

Expenditure Method
National income is calculated using this method as a flow of expenditure. The gross
domestic product (GDP) is the total of all private consumption expenditures.
Government consumption expenditure, gross capital formation (public and private),
and net exports are all factors to consider (Export-Import).

As said above, the flow of expenditure is used to calculate national income.