CHAPTER 3
Market and National Income

What is Market?
 “A market is defined as the sum total of all the
buyers and sellers in the area or region under
consideration. The area may be the earth, or
countries, regions, states, or cities”

Types of Market?
1. Perfect Competition Market.
2. Monopoly Market.
3. Monopolistic Market.
4. Oligopoly Market.

1. Perfect Competition Market
 Large number of buyers and sellers.
 Homogenous product is produced by every firm.
 Free entry and exit of firms.
 Zero advertising cost.
 Consumer Have all Knowledge about market
 No government intervention.
 No transportation costs.
 Every firm is a price taker.

2. Monopoly Competition Market
 One Seller and Large Number of Buyers.
 No Close Substitutes.
 Difficulty of Entry of New Firms.
 Price Maker.
 Monopolist firm can control the supply.
 Restriction on entry.

3. Monopolist Competition Market
 Many firms.
 Freedom of entry and exit.
 Firms produce differentiated products.
 Firms have price inelastic demand; they are price
makers because the good is highly differentiated.
 Selling cost determine the demand of product.
 Firms make normal profits in the long run but
could make supernormal profits in the short term.

4. Oligopoly Competition Market
 Few Sellers.
 Interdependence.
 Advertising.
 Competition.
 Entry and Exit Barriers.
 Lack of Uniformity.
 Sell homogeneous Products

National Income
 National income means the value of goods and
services produced by a country during a financial
year. Thus, it is the net result of all economic
activities of any country during a period of one
year and is valued in terms of money

1. Gross Domestic Product (GDP)
GDP=(P*Q) Were,
 GDP=Gross Domestic
Product
 P=Price of goods and
service
 Q=Quantity of goods and
service
GDP=C+I+G+(X-M) Were,
 C=Consumption
 I=Investment
 G=Government expenditure
 (X-M) =Export minus import

2. Gross National Product (GNP)
GNP=GDP+NFIA (Net Factor Income from Abroad)
or, GNP=C+I+G+(X-M) +NFIA
Hence, GNP includes the following:
 Consumer goods and services.
 Gross private domestic investment in capital goods.
 Government expenditure.
 Net exports (exports-imports).
 Net factor income from abroad.

3. Net National Product (NNP)
 NNP=GNP-Depreciation Or,
 NNP=C+I+G+(X-M) +NFIA-Depreciation

4. National Income (NI)
 NI = NNP + Subsidies - Interest Taxes

5. Personal Income (PI)
 Personal Income is the total money income
received by individuals and households of a
country from all possible sources before direct
taxes.

6. Disposable Income (DI)
 DI=PI-Direct Taxes
From consumption approach,
 DI = Consumption Expenditure + Savings

7. Per Capita Income (PCI)
 PCI=Total National Income / Total National
Population

Important questions:
Q.1 What is mean of market? Derived different types of market.
Q.2 Explain the pure completion market with their characteristic (feature).
Q.3 Explain the monopolistic competition market with feature.
Q.4 Explain the oligopoly market with feature.
Q.5 What is national income? Explain in detail
OR
Q.6 explain the different concept of national income.