CONCEPTS OF NATIONAL INCOME, Gross National Product, Net National Product (NNP), Personal income

 There are various concepts of national income

Gross National Product (GNP)

Gross national product is defined as the total market value of all final goods and services produced in a year. GNP includes four types of final goods and services, (i) Consumer goods and services to satisfy the immediate wants of the people (ii) gross private domestic investment on capital goods consisting of fixed capital formation, residential constructions and inventories of finished and unfinished goods, (iii) goods and services produced by government and (ir) net export of goods and services'

GNP = government production + private output

Net National Product (NNP)

The second concept is Net National Product. The capital goods like machinery wear out as a result of continuous use. This is called depreciation. This is also called National income at market prices. Hence NNP = GNP - depreciation.

National Income at factor cost

National income at factor cost denotes the sum of all incomes earner by the factors. GNP at factor cost is the sum of the money value of the income produced by and accruing to the various factors of production in one year in a country. It includes all items of GNP less indirect tax. GNP at market price is always more than GNP at factor cost as GNP at factor cost is the income which the factors of production receive in return for their service alone.

National income at factor cost = net national product - indirect taxes + subsidies.

1. Personal Income (PI)

Personal income is the sum of all incomes received by all individuals during a given year. Some incomes such as Social security contribution are not received by individuals; similarly some incomes such as transfer payments are not currently earned, for example Old Age Pension. Therefore,

Personal income = national income - social security contribution - Corporate income taxes - undistributed corporate profit + transfer payment.

When and how Equilibrium is occurred in case of demand and supply?

When supply and demand are equal (i.e. when the supply function and demand function intersect) the economy is said to be at equilibrium. At this point, the allocation of goods is at its most efficient because the amount of goods being supplied is exactly the same as the amount of goods being demanded.

Thus, everyone (individuals, firms, or countries) is satisfied with the current economic condition. At the given price, suppliers are selling all the goods that they have produced and consumers are getting all the goods that they are demanding.

 As you can see on the chart, equilibrium occurs at the intersection of the demand and supply curve, which indicates no a locative inefficiency. At this point, the price of the goods will be P*and the quantity will be Q*. These figures are referred to as equilibrium price and quantity. In the real market place equilibrium can only ever be reached in theory, so the prices of goods and services are constantly changing in relation to fluctuations in demand and supply.