Final answer:
The term "value added" accurately refers to the enhanced worth created in a product or service as a result of the contribution of factors of production such as labor, materials, and machinery.
Step-by-step explanation:
The term "value added" refers to the additional worth created in a product or service through the use of factors of production, which include labor, materials, and machinery. When factors of production are used to create goods or provide services, they contribute to making the end product more valuable than the sum of the inputs. This concept is a fundamental aspect of economics and understanding how value is created in an economy.
For instance, when producing a cell phone, the components (materials), the workers' skills (labor), and the machines used for assembly (machinery) all contribute to the final value of the cell phone. Similarly, in services, the professionalism and expertise of a hairstylist (labor), the quality of hair care products (materials), and the comfort of the salon chairs (machinery) add to the overall service provided. Each of the factors of production adds a certain value to the final service that wasn't there before, which is why the term "value added" is indeed associated with the contribution of factors of production to the value of a final product or service.