Factorkosten versus marktprijs

In a simple economy, there are three producers: Alex, the baker; Priya, the carpenter; and Sam, the solar panel manufacturer. Alex bakes bread, Priya builds furniture, and Sam makes solar panels.

Each of them incurs production expenses—known as factor costs—which include raw materials, wages, rent, depreciation, and profits. These factor costs collectively represent the economy’s Gross Domestic Product at factor cost, reflecting the total value of goods based on production expenses.

However, consumers usually pay a different amount, known as the market price. This includes indirect taxes and accounts for any government subsidies.

For example, a loaf of bread has a factor cost of $2, and a $0.50 tax raises its market price to $2.50. Furniture prices also rise with taxes, while subsidies lower the price of solar panels.

Economists adjust the GDP at factor cost by adding indirect taxes and subtracting subsidies to calculate the GDP at market price.

This calculation provides a clearer view of the total economic activity from the consumer’s perspective.