The computation of the incremental worth generated by individual entities, such as Firm A and Firm B, within a supply chain or economic system is a crucial analytical process. It involves determining the difference between the value of a firm’s outputs and the cost of its inputs. For example, if Firm A purchases raw materials for $100, processes them, and sells the finished goods for $300, the entity’s incremental worth creation is $200.
Determining this incremental worth offers significant advantages. It provides a clear understanding of each entity’s contribution to the overall economic output, facilitating better resource allocation and performance evaluation. Historically, this concept has been central to national income accounting and productivity analysis, guiding policy decisions related to taxation, investment, and industrial development. Accurate assessment helps to identify areas for improvement and enhance overall economic efficiency.
