Use the Following Data for an Ice-Cream Vendor at a Local

question 54

Essay

Use the following data for an ice-cream vendor at a local fair:
(A)Calculate the vendor's value added.
(B)Profits are revenue minus costs. Capital income consists of profits, rents, and interest. Show that the value added equals capital income plus labor income paid by the vendor.
(C)Suppose that at a similar fair, the temperature is cooler and revenues fall to $1,500, but the prices of intermediate inputs, rental fees, and wages and salaries do not change. What happens to value added and profits in this case?

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Definitions:

Raw Material

The basic material from which a product is made, often processed in manufacturing to create a final product.

Production

The process of creating goods and services.

March

A month of the year falling between February and April.

February

The Gregorian calendar's second month.