Difference between Value of Output and Value Added

What are the major differences between Value of Output and Value Added?

Value of output and value added are two important economic concepts that are used to measure the performance of a business or industry.

The main difference is value of output is the total value of goods and services produced by a business while value added is the value that a business adds to its inputs through its production process.

Before we move to the differences, let’s understand what are Value of Output and Value Added:

  • Value of Output: Value of output is the total value of goods and services produced by a business. This includes all the products and services that the business sells, as well as any goods and services that are used internally. It is usually measured in monetary terms, such as dollars or euros.
  • Value Added: Value added is the value that a business adds to its inputs through its production process. This is calculated by subtracting the cost of all inputs, such as raw materials, labor, and energy, from the total value of output. It is also usually measured in monetary terms.

Value of Output vs Value Added

Now, let’s move to Value of Output vs Value Added:

Major differences between Value of Output and Value Added

Value of Output Value Added
Value of output is the total value of goods and services produced by a business. Value added is the value that a business adds to its inputs through its production process.
Value of output is used to measure the overall performance of a business or industry. Value added is used to measure the efficiency and productivity of a business.
Value of output can be affected by external factors such as market demand. value added is affected by internal factors such as production processes and management.
Value of output is used to determine the economic growth of a country. Value added is used to measure the competitiveness of a business or industry.
Value of output includes all the products and services that the business sells, as well as any goods and services that are used internally. Value added only includes the value added to inputs through the production process.

That’s it.

Note that sometimes, the question might also be asked as “distinguish between Value of Output and Value Added”.

Also see:

Final words

Value of output and value added are two important economic concepts that are used to measure the performance of a business or industry.

Understanding the key differences between the two, such as the fact that value of output is the total value of goods and services produced by a business, while value added is the value that a business adds to its inputs through its production process, is essential for understanding economics.

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