Answer to Question #214155 in Macroeconomics for Geleta

Question

A farmer grows a kilogram of wheat and sells it to a Miller for $1.00. The Miller turns the 

wheat into flour and then sells the flour to a baker for $3.00. The baker uses the flour to 

make bread and sells the bread to an engineer for $6.00. The engineer eats the bread. What is 

the value added by each person? What is GDP?

Answer 1

Each person adds:

The farmer: $1-0=1$

The miller: $3-1=2$

The baker: $6-3=3$

GDP= final product cost=6 or GDP= amount of value added=$1+2+3=6$