Consider an economy that having only of those who bake bread and those who make its ingredients.
Assume that this economy's production is as follows: 1 million loaves of bread (sold at Rs. 2.00 each); 1.2 million pounds of flour (sold at Rs. 1.00 per pound) and 100,000 pounds each of yeast, sugar & salt (all sold at Rs. 1.00 per pound). The flour yeast, sugar & salt are5 sold only to bakers, who use them exclusively for the purpose of making bread.
a) Calculate the total income of the economy.
b) How much value is added to the flour, yeast, sugar & salt when the bakers turn into bread?