Economics- XII Latest Edition Prescribed by CBSE by Agarwal Mrs. Sharad & Agarwal Dr. Anupam

Author:Agarwal, Mrs. Sharad & Agarwal, Dr. Anupam [Agarwal, Mrs. Sharad]
Language: eng
Format: epub
Publisher: SBPD Publications
Published: 2020-06-06T16:00:00+00:00

Profit

(c) Mixed Income of self–employed

(d) Net factor income from abroad.

Box 8

Wage :

Rent :

Reward given to labour for his work.

Reward given to the landlord or owner of building.

It includes imputed rent. Rent of owner occupied houses should be imputed on the basis of prevailing market price and be included in the national income.

Interest : Reward on the capital given as loan.

Profit : Rewards to firms for bearing uncertainties and risks in the production process. Components of Profit :

(i) Dividend : A part of the profit which is distributed by the company among shareholders. (ii) Undistributed Profit : The remaining profit income of the company after paying profit tax and dividend is called the reserve fund which is also known as undistributed profit. (iii) Corporate Profit Tax : It is a direct tax which government imposes on the profit income of the company.

● Operating Surplus : It refers to income from property and enterpreneurship. It includes : (i) Rent, (ii) Interest, (iii) Profit

● Mixed Income : Mixed income refers to the incomes of the self-employed persons using their labour, land, capital and entrepreneurship to produce goods and services. These incomes are mixed in terms of wages, rent, interest and profit. That is why it is called mixed income. Such incomes are also a part of national income.

● Surplus of Public Sector : Income earned by public enterprises is also a part of national income.

Box 9

Factor Income is different from Transfer Income

A factor income refers to income earned by a person as a reward for rendering his factor service. It may be in the form of wage salary for his labour, rent for his land, interest for his capital or profit for his entrepreneurship. It must be noted that factor incomes are only ‘ earned ’ incomes. It does not include any income which is ‘not earned ’ or for which a factor service has not been rendered. Transfer income , on the other hand, is ‘not earned ’ income against which no service is rendered in the economy. old age pension received by the senior citizens is not the earned income. It is just a help by the government for which no service has been rendered. Such receipts or payments are called transfer receipts or transfer payments. These are not factor incomes and therefore not included in the estimation of national income. Thus,

(i) Factor incomes are earned incomes and transfer payments are unearned.

(ii) Factor incomes are rewards for rendering factor services. Transfer payments are just one sided payments.

No service is rendered in return for the transfer payments.

Box 10

18.3.1. A Brief Review of Calculating National Income from Income Method

NNPFC or Wage + (OperatingNet Factor National = Surplus) + Mixed Income + Income from Income Abroad Operating Surplus = Rent + Interest + Profit

18.3.2. Precautions related to Income Method

1. Income from Sale of Second-hand Goods : Any income from the sale of second-hand goods and property is not included in national income. But any commission paid on such a transaction becomes the part of national income.

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