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The usual GDP formula is

$$GDP = C + I + G + (X-M)$$

But suppose I am a company and I produce some goods $q$ which I sell at a price $p$. Suppose also I don't know how much of the units actually get sold.

How do I include this information into the GDP equation?

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  • $\begingroup$ Not knowing how many goods you're selling is pretty bad for a company ayy lmao (but did you have an industry in mind?) $\endgroup$ – Kitsune Cavalry Jan 11 '16 at 7:49
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This formula of GDP is an expenditure approach, which classify the country's output by category of final consumers. Therefore, you should determine who demands your product (ie who spends money to purchase your production): If $q_C$ is consumed by households, $q_I$ by firms, $q_G$ by the Government and $q_X$ is exported, then your new GDP is:

$$ GDP' = C \times p\cdot q_C + I\times p\cdot q_I + G\times p\cdot q_G + ( X\times p\cdot q_X - M) $$

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  • $\begingroup$ My question is about how a company's production would be factored into GDP. It sounds like you are saying the demand-sides approach is the wrong one. $\endgroup$ – Stan Shunpike Jan 11 '16 at 7:24
  • $\begingroup$ @StanShunpike It is not the wrong one, but it is not the most simple one indeed. The production approach would be more appropriate : you calculate your gross output and subtract the intermediate consumptions. The sum of all these gross value added make up the GDP. (I have also edited my post, "demand approach is not the correct denomination, it should be "expenditure approach") $\endgroup$ – Hector Jan 11 '16 at 7:40
  • $\begingroup$ What is the typical way of mathematically representing the production approach? I know u described it in words, but I was just curious what symbols are used conventionally $\endgroup$ – Stan Shunpike Jan 11 '16 at 8:12
  • $\begingroup$ I do not know the symbols typically used, though I guess you can use acronyms as long as you properly define them. FYI, there is also a third approach to calculate GDP, the Income approach. The Wikipedia article is well structured if you want more details on each approach: en.wikipedia.org/wiki/Gross_domestic_product#Determining_GDP $\endgroup$ – Hector Jan 11 '16 at 8:23
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Figures for GDP are obtained from final accounts of companies. It is not simple as Hector suggested to obtain the final figure. You will have aggregate values of production and sales. See the this link and browse through for more info. This link gives you output measures.

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