<p>What you are missing is the concept of <strong><em>GDP deflator</em></strong> .
Which is there while studying National Income Accounting.</p>

<p>When you are comparing change in Valve Added (GDP) of 2016 and 2017 , the change could have been mainly due to two reasons :-</p>

<ul>
<li><em>Increase in production</em></li>
<li>or <em>Change in prices</em></li>
</ul>

<p>While comparing Value Added by the company in two years , second reason i.e change in prices would give us false result as while comparing GDP we want to see how much the production has increased/decreased between the years , but the change in prices might show an exaggerated value of GDP if we do not take into account the change in prices .</p>

<p>For getting the correct answer what we do is that we take one year as base year(generally the first year given to us i.e 2016 in your case) and calculate the GDP on the basis of the prices prevalent on that year , so that we get a true picture of real change in GDP .</p>

<p><span class="math-container">$$
\text{GDP Deflator} = \frac{\text {Nominal  GDP}}{\text{Real GDP}} \cdot {100}
$$</span></p>

<p>Where Nominal GDP is the GDP of 2017 at current year i.e 2017 prices 
And Real GDP is the GDP of 2017 calculated at base year prices i.e 2016</p>

<p>Also remember the formulae <span class="math-container">$\text{GDP = Units produced * Price per unit} $</span></p>

<p><strong><em>Do refer to the following hyperlink</em></strong></p>

<ul>
<li><a href="http://www.pitt.edu/~mgahagan/PriceIndexes/cpigdp.htm" rel="nofollow noreferrer"><strong>GDP deflator</strong></a></li>
</ul>

<p>Hope you find my answer useful. :)</p>

CC BY-SA 4.0
2018-11-17T15:49:13.247Z
Hi @JIM thanks a lot for the response but my problem is that the company produces many products and its difficult to idstinguish unit prices and quantities for all products to just deflate added value 

Is there any method to deflate it ?

Or is there any method to compare between vales of different years without using deflation ?
Thanks a lot in advance for any help
prep
CC BY-SA 4.0
2018-11-17T16:25:05.120Z
@prep Your question seems to be unclear as it is missing data , can you see if you can provide all the data given in the question ?
JIM
CC BY-SA 4.0
2018-11-17T17:10:56.850Z
hi @JIM   value added of 2015 is  1 639 902 of 2016 is  2 267 700 and of 

2017 is 1 995 601

this is all the data i have the company produces gas petrol and gpl
prep
CC BY-SA 4.0
2018-11-22T19:45:07.610Z
so for an oil company value added can be deflated using industrial hydrocarbon sales price indexes ? means real value added (2017 price 2016)=nominal value added/industrial hydrocarbon sales price indexe (year 2016) ? else how can i deflate values ? thanks a lot in advance for any response
prep
CC BY-SA 4.0
2018-11-23T08:06:38.350Z
@prep I am not really sure how to deflate value .
JIM
CC BY-SA 4.0
2018-11-23T19:29:18.617Z
hi @JIM thank you for contribution hi all please if any one can help me please do it because i need the response as soon as possible please
prep
CC BY-SA 4.0
2018-11-24T03:13:39.603Z
@prep If you need help by others , put the data of your question and your doubts in comment section of your question
JIM
CC BY-SA 4.0
2018-11-25T11:28:46.753Z
done but no one react :(  and i am so pressed for time can you give me where can i find answers please thanks in advance
prep
CC BY-SA 4.0
2018-11-25T15:54:43.417Z
@prep Unfortunately that's how this site works . Even when I was new to this site , I was not able to get response sooner .Even I have not yet been responded to my many of my questions.  I had say you will have to wait for response . The economics stack exchange is not much developed yet like maths one . Neither can you ask it somewhere else as there are not any good Q and A sites . One thing you could do is to edit your main question by adding more details and data . If you do not get response even after that , then you must ask it from some teacher you know .
JIM
CC BY-SA 4.0
2018-11-17T03:59:50.833Z
2018-11-17T03:59:50.833Z
JIM
<p>i  have the value  added  of  a  company for 2 years  2016  and  2017  so  to  compare these  values and to see its evolutioon i divided the value of 2017 by  the one of  2016</p>

<p>but  some friends told me that the comparison i am doing is false because  values should  be calculated using  same  price  base</p>

<p>so  what should i do to have a correct  evaluation  ?</p>

<p>thanks a lot  in advance for  any help  </p>

CC BY-SA 4.0
2018-11-24T16:08:29.507Z
hi all for an oil company value added can be deflated using industrial hydrocarbon sales price indexes ? means real value added (2017 price 2016)=nominal value added/industrial hydrocarbon sales price indexe (year 2016) ? else how can i deflate values ? thanks a lot in advance for any response
prep
<mathematical-economics>
Evaluate value added of a company
prep
# Evaluate value added of a company

(Asked by: username_0 on 2018-11-10)

i have the value added of a company for 2 years 2016 and 2017 so to compare these values and to see its evolutioon i divided the value of 2017 by the one of 2016

but some friends told me that the comparison i am doing is false because values should be calculated using same price base

so what should i do to have a correct evaluation ?

thanks a lot in advance for any help

**Tags:** mathematical-economics
> **Comments:**
> **username_0**: hi all for an oil company value added can be deflated using industrial hydrocarbon sales price indexes ? means real value added (2017 price 2016)=nominal value added/industrial hydrocarbon sales price indexe (year 2016) ? else how can i deflate values ? thanks a lot in advance for any response  

---

## 1 answers

### Answer by username_1 on 2018-11-17. Score: 1

What you are missing is the concept of ***GDP deflator*** .
Which is there while studying National Income Accounting.

When you are comparing change in Valve Added (GDP) of 2016 and 2017 , the change could have been mainly due to two reasons :-

* *Increase in production*
* or *Change in prices*

While comparing Value Added by the company in two years , second reason i.e change in prices would give us false result as while comparing GDP we want to see how much the production has increased/decreased between the years , but the change in prices might show an exaggerated value of GDP if we do not take into account the change in prices .

For getting the correct answer what we do is that we take one year as base year(generally the first year given to us i.e 2016 in your case) and calculate the GDP on the basis of the prices prevalent on that year , so that we get a true picture of real change in GDP .

$$
\text{GDP Deflator} = \frac{\text {Nominal GDP}}{\text{Real GDP}} \cdot {100}
$$

Where Nominal GDP is the GDP of 2017 at current year i.e 2017 prices
And Real GDP is the GDP of 2017 calculated at base year prices i.e 2016

Also remember the formulae $\text{GDP = Units produced \* Price per unit} $

***Do refer to the following hyperlink***

* [**GDP deflator**](http://www.pitt.edu/~mgahagan/PriceIndexes/cpigdp.htm)

Hope you find my answer useful. :)

> **Comments:**
> **username_0**: Hi @JIM thanks a lot for the response but my problem is that the company produces many products and its difficult to idstinguish unit prices and quantities for all products to just deflate added value   Is there any method to deflate it ?  Or is there any method to compare between vales of different years without using deflation ? Thanks a lot in advance for any help  
> **username_1**: @prep Your question seems to be unclear as it is missing data , can you see if you can provide all the data given in the question ?  
> **username_0**: hi @JIM   value added of 2015 is  1 639 902 of 2016 is  2 267 700 and of   2017 is 1 995 601  this is all the data i have the company produces gas petrol and gpl  
> **username_0**: so for an oil company value added can be deflated using industrial hydrocarbon sales price indexes ? means real value added (2017 price 2016)=nominal value added/industrial hydrocarbon sales price indexe (year 2016) ? else how can i deflate values ? thanks a lot in advance for any response  
> **username_1**: @prep I am not really sure how to deflate value .  
> **username_0**: hi @JIM thank you for contribution hi all please if any one can help me please do it because i need the response as soon as possible please  
> **username_1**: @prep If you need help by others , put the data of your question and your doubts in comment section of your question  
> **username_0**: done but no one react :(  and i am so pressed for time can you give me where can i find answers please thanks in advance  
> **username_1**: @prep Unfortunately that's how this site works . Even when I was new to this site , I was not able to get response sooner .Even I have not yet been responded to my many of my questions.  I had say you will have to wait for response . The economics stack exchange is not much developed yet like maths one . Neither can you ask it somewhere else as there are not any good Q and A sites . One thing you could do is to edit your main question by adding more details and data . If you do not get response even after that , then you must ask it from some teacher you know .  

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