In economics what does value added mean?
Answer:
Value added is something free added to your purchase. For example. if you bought a new car. the free oil changes would be value added. If you buy Radio or Television advertising and they include free billboards or sponsorships ..these are value added.
Its when you take a basic produce and add value by painting or adding features (bells and whistles) and selling it as a new and/or different product.
Value added refers to the additional value created at a particular stage of production or through image and marketing. In modern neoclassical economics, especially in macroeconomics, it refers to the contribution of the factors of production, i.e., land, labor, and capital goods, to raising the value of a product and corresponds to the incomes received by the owners of these factors. The factors of production provide "services" which raise the unit price of a product (X) relative to the cost per unit of intermediate goods used up in the production of X.
For example, making apples into apple juice increases the value or price beyond that of the unprocessed apples. Organic has more value or price than produce that is not produced organically. In this case, value is added because the identity of the product is preserved--it is not simply an apple, it is an organic apple. Another example of value added in this way is fair-trade coffee. There can also be a value added to a product when the market for the product increases, giving the producer an added value for the product due to the greater demand. Renewable energy produced on farmland is another source of added value, such as converting manure to methane for fuel.
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