Expenditure Approach

In this example, households are ultimate users of oranges. Sharma Juices is not an ultimate user of oranges because it sells the oranges (in processed, liquid form) to households. Thus ultimate users purchase Rs. 10,000 of oranges from Khanna Fruits and Rs. 40,000 of orange juice from Sharma Juices for a total of Rs. 50,000, the same amount computed in both the product and income approaches.

Output or Value added method is primarily used in the registered manufacturing units and primary sector in India. Income method is used in services sector. Whereas, the expenditure method is adopted to calculate the contribution of Real Estate Sector.

The product method is the principal method used in underdeveloped economies, whereas income method is generally used in developed economics for the estimation of national income.