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ADDED VALUE

31/7/2019

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What is the difference between these two pictures?

Picture
Picture
 Can you tell the difference between these two pictures? The 'under construction' sign tells us that something is being constructed (perhaps a house) and to your right you see an actual house! These pictures show an unfinished and a finished/final product.

But, what if the construction never completed? Would the house be completed? Should the house be completed? Why is it important for it  to be completed?

The above questions brings us to today's topic of 'added value'. The definition of added value states that it is the difference between the raw materials that are used to make the house, against the price of the house that it is sold for. In other words, an uncompleted house holds no value = or to be put simply, raw materials alone holds no value to a business, unless it is being converted into a final product, where the business would be able to set a selling price to the product. Hence if you look at the picture on your right -  the final, completed house gives value that customers would be willing to pay for, because they are able to see the effort that the construction company has put into making it as attractive as it looks. This also means, if businesses put more value or effort into creating value for their products, they may possibly have higher chances to set competitive prices that will  eventually lead to higher sales volume!

However, this also brings the question to whether added value is the same as profit, since added value talks about the difference between raw materials and selling price. To explain on this, I urge you to watch my video in the 'Videos' Section of this website for you to determine if added value is the same as profit.

Thanks for reading this today. Please 'follow' me for more reading materials to help you ace business studies!
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    Ms. Savage

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