National Income — Economics STD 12 Commerce / Arts — Question
Maharashtra BoardEnglish MediumSTD 12 Commerce / ArtsEconomicsNational Income4 Marks
Question
National Income at factor cost includes subsidy.
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Answer
Yes, I agree with this statement.
National Income at factor cost is the income earned by the factor owners (landlord, labourer, capitalist) in the course of contributing to the country’s output.
NI(FC) = C + I + G + (X – M)+ (R – P) – Depreciation – Indirect Tax + Subsidies
Subsidies is a negative tax. It is a sought of concession or discount given by the government to the consumers and producers.
Subsidies are paid by the government to the firms / producers.
Also the goods are sold at a price lower than their cost.
Subsidies reduce the price of product below the factor cost. So to arrive at N.I. at factor cost we add subsidies.
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