The most comprehensive measure of aggregate income which is widely known is Gross National Product at market prices. Alternatively, if National income is treated as a flow of expenditure, the method used is called the Expenditure method.
Final goods are those goods which are directly consumed and not used in further production process. With economic developmentthe share of transport, communication, energy, banking and insurance to the national product would automatically increase as is experienced in India.
In other words, these basic sectors were not free from fluctuations and in a way the fluctuations in them cause the over all fluctuations. Among the sectors, the primary sector understandably recorded wide fluctuations followed by the secondary and then the tertiary sectors.
Difficulty in differentiating the economic functions performed is yet another limitation in the estimation of national income. Let us now look into the contents of each of these methods. It is also possible to measure the value of the total output or income originating within the specified geographical boundary of a country known as domestic territory.
A successful monsoon boosts up the rate of growth while an adverse monsoon brings down the rate. These three approaches to the Managerial economics national income of national income yield identical results. In Indian case, the contribution by the urban sector to NDP is very much higher than that of the rural sector.
By deducting depreciation from this we obtain the Net National income at factor cost. Value added can be defined as the difference between the value of output produced by that firm and the total expenditure incurred by it on the materials and intermediate products purchased from other business firms.
Of course this problem is experienced by every country. Market Prices and Factor Costs The valuation of the national product at market prices indicates the total amount actually paid by the final buyers while the valuation of national product at factor cost is a measure of the total amount earned by the factors of production for their contribution to the final output.
The compilation of data for national income estimation is taking place in a very loose manner. Measures of National Income For the purpose of measurement and analysis, national income can be viewed as an aggregate of various component flows.
The study of per capita distribution of GDP in agricultural and non-agricultural sectors indicates that over four decades the per capita distribution is more in the case of non-agricultural sector than the agricultural sector.
National and Domestic Concepts The term national denotes that the aggregate under consideration represents the total income which accrues to the normal residents of a country due to their participation in world production during the current year.
This could be calculated at market prices or at factor cost as in the other methods. For example, the services of cook, household preparations of edible items, etc. Lack of data relating to the income of small producers and household enterprises is yet another serious limitation.
In Indian experience, the failure of monsoon is a regular feature and so the growth rate in National income has been declining over the decades. Apart from these traditional methods of measuring National income, one more method is evolved and it is called the Value added method.
Obviously the aggregation of these data will involve lot of inaccuracies. This tendency is welcome because the primary and secondary sectors can only generate limited employment opportunities while the service sector or the tertiary sector or the non-commodity sector has greater potential in respect of employment.
Next Page Definition of National Income The total net value of all goods and services produced within a nation over a specified period of time, representing the sum of wages, profits, rents, interest, and pension payments to residents of the nation.
In Indian case also this has become true. The resulting measure is called "domestic product". Value of money for all final goods and services is produced in an economy during a year. Existence of black money and unaccounted money is another major hurdle in the estimation of national income.
They provide three alternative methods of measuring essentially the same magnitude. In this method, national income is measured as a flow of expenditure incurred by the society in a particular year. In our economy product approach benefits various sectors like forestry, agriculture, mining etc to estimate gross and net value.
Net indicates that provision for capital consumption has already been made or that depreciation has already been deducted.
This approach is also called as income distributed approach. The conceptual confusions associated with national income estimation have not been cleared satisfactorily and so the estimation process is subjected to various interpretations.
In that manner only the net accretion in value of a product or service will be taken into account to arrive at the final value of all goods and services produced in a year.
The contribution by different sectors to the Net Domestic Product NDP will vary from country to country and even for a country from time to time depending upon the stage of economic development.
If National income is treated as a flow of income then the relevant method of measuring it is called Income method.National Income or Net National Income at Factor Cost: NNI at factor cost = NNI at MP + Subsidies – Indirect Taxes government earned profits.
Personal Income: Disposable Income: Disposable income shows the purchasing power of the households. Concepts Summarized: The following chart summarizes the various concepts of national income. National income Managerial Economics 1. NATIONAL INCOME 2. NATIONAL INCOME “National income is the aggregate money value of all final goods and services produced in an economy in an accounting year” The growth rate of an economy is measured primarily by the rate at which the real national income is growing.
3. Managerial Economics assists the managers of a firm in a rational solution of obstacles faced in the firm’s activities. It makes use of economic theory and concepts. It helps in formulating logical managerial decisions. The key of Managerial Economics is the micro-economic theory of the firm.
It is reasonable to expect that the income generated through these sources is substantial and when it is not included in national income the estimate of national income is very much less. Difficulty in differentiating the economic functions performed is yet another limitation in the estimation of national income.
National Income National income is a measure of the value of the output of the good and services produced by an economy over a period of time. It is defined as a flow of output. Economic essay National income is a measure of the value of the output of the good and services produced by an economy over a period of time.
Definition of National Income. The total net value of all goods and services produced within a nation over a specified period of time, representing the sum of wages, profits, rents, interest, and pension payments to residents of the nation.Download