A farmer grows wheat, which she sells to a miller for $90. The miller turns the wheat into flour, which she sells to a baker for
$145. The baker turns the wheat into bread, which she sells to consumers for $155. Consumers eat the bread. Assume that the above transactions account for all economic activity in an economy.
Selling price of wheat by miller= $90 Selling price of flour by miller= $145 Selling price of bread by baker = $155 In this economy the GDP is $155 because it is the final price he got for the wheat. So the miller initially had $90 and sold the flour for $145, so he gets an additional 145 - 90 that is $55 gain Now the baker have $145 and makes the bread and sell it for $155, so he 155 - 145 that is $10 extra. Adding up all these profit amount 90 + 55 + 10 again making it 155 which is GDP.
