Value addition

Economic activities are those that have value in money. They also add value at each stage of turning something into another form. This is called value addition.

The book works it out with Rajesh, a carpenter. He buys wood in a nearby market for ₹600 to make furniture. He uses special tools and other materials to build it.

Rajesh sells a chair for ₹1,000 in the market. The wood for the chair cost ₹600. So what is the remaining ₹400 (₹1,000 − ₹600) for?

It is the money value of Rajesh's skill, time and effort, which went into making the chair. Rajesh has added value to the wood by turning it into furniture. The wood did not become more wood; it became something people want more, and the extra ₹400 measures what his hands did to it.

From buying the wood to selling the chair, these activities involve payment, so they are all economic activities.

The book then asks you to go through a list and tick the activities that create money value, such as a baker, a tailor, a doctor or a scientist at work, and to notice the ones that do not, such as farmers repairing their own tractor, parents cooking dinner for their family, or someone looking after a sick grandparent.