Meaning And Concept of National Income | Economics Class 11

Notes | Commerce
Meaning And Concept of National Income
For: Management Class 11

Meaning of National Income

National Income is the sum of all incomes of the people of a country in a particular period of time. In other words, the monetary value of final goods produce in a country during a year is called national income. Alternatively, national income includes payments made to productive resources in the form of wage interest, rent, profit etc. Thus,

N.I. =Wage + Rent + Interest + Profit.

National Income shows the economic condition of the country. A country with high national income is said to be a prosperous country and low is said to be a poor country.

Different Concepts of National Income

1. Gross Domestic product. (GDP)

GDP is the sum of money value of all final goods and services produced with in the domestic territory of country during a year. It should be noted that goods and services must be produced with in the country. In order to calculate the value of GDP, all goods and services produced are multiplied by their market prices. 

GDP=∑ (P X Q)

Where, P= Price of goods and services.

Q= Quantity of goods and services.

In other words, GDP measures expenditures made on goods and services by consumer, business man, government and net foreign export of a country during a year.

GDP= C + I + G + (X – M)

Where,

C= Consumption expenditure.

I= Investment expenditure.

G= Government expenditure.

X= export.

M= Import.

(X – M) = Net export.

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