- National income - Factors determining national income - Factors affecting size of national income

1. Factors influence national
income
Presented by: Nabina Bhasima
Bsc. Nursing 4th year

2. Overview:
- National income
- Factors determining national income
- Factors affecting size of national income

3. NATIONAL INCOME
• The labour and capital of a country acting on its
natural resources produce annually a certain net
aggregate of commodities, material and immaterial
including services of all kinds.
- Marshall

4. Contd..
• Income which can be measured in terms of money
is National Income.
• In the words of Pigou, “National income is that part
of objective income of the community, including of
course income derived from abroad which can be
measured in money”.

5. Contd..
• National income consists solely of services as
received by ultimate consumers, whether from
their material or from their human environments.
- Fisher
• National income is a collection of goods and
services reduced to a common basis by being
measured in terms of money.
- Hicks

6. Contd..
• Therefore, all the above definitions make it clear
that national income is the monetary measure of:-
The net value of all products and services.
In an economy during a year.
Counted without duplication.
Both in the public and private sector of products
and services.
In consumption and capital goods sector
The net gains from international transactions.

7. Factors determining national
income
• There are a number of influences which
determine the size of the national income in
a country.
• On account of these influences, one country
is found to have larger national income than
the other.

8. Contd..
• The three main influences are:
1. Quality and quantity of factors of production
2. The state of technical knowhow and
3. Political stability

9. 1. The Quality and quantity of
factors of production
• The quality and quantity of land, the climate, the
rainfall etc, determine the quality and quantity of
agricultural production.
• This is found to determine the size of the national
income.
• The quantity of labor has a double influence since
labor is both a factor of production as well as the
consumer of what is produced.

10. Contd….
• Normally, the quality of labor depends upon the
intelligence of the individual, education and
training which is turn is responsible in deciding
the volume of industrial production.
• Capital may comprise simple and primitive tools
or the most modern equipment.
• This will also have decisive influence on the
output.

11. Contd….
• Likewise, the quantity and quality of
entrepreneurial ability is also an important
elements to reckon within the determination
of the size of the national income of the
country.

12. 2. The size of technical knowhow:
• The country with a poor technical knowledge
cannot have a large size national income as it will
be incapable of exploiting its resources
efficiently.
• The extent of technical knowhow and technology
of production determine the capital formation in
the country apart from other factors.

13. Contd..
• Despite having abundant resources in the
country, it will be considered as dormant in the
absence of any development if the available
resources arenot scientifically exploited.
• Natural resources combined with the advanced
technology will go a long way in increasing the
size of national income or economic
development.

14. 3. Political stability
• Political stability is considered to be an
essential pre-requisite for maintaining the
production at the higher level.
• The economic development of several
countries are often affected by political
instability.

15. Contd…
• The key towards increasing the national income
normally rests with the important factors like natural
resources, capital formation, technical knowhow,
political stability and all above national character of
people.
• In case of background countries, all these factors are
found to deplorably lacking and the size of the
national income will be less during those
circumstances.

16. Factors affecting size of national
income
1. National resources
2. Man made sources
3. Capital
4. Human resources
5. State of technology
6. Entrepreneurial ability
7. Political instability
8. Spirit of work
9. Division of labour and specialization

17. 1. National resources
• Natural resources are those which are god
gifted like land, minerals, rivers, mountains and
climate.
• If any climate is rich in natural resources, its
national income volume depends upon the
natural resources.

18. 2. Man made sources
• Roads, canals, building, railways, factories
are man made sources are in large number
then the size of national income will be
greater.

19. 3. Capital
• Capital is considered the life blood for the modern
economy.
• The volume of production depends upon the
quality and quantity of capital available in the
country.
• “poor country is poor because it is poor.
• Under developed countries per capita income is low
because there is deficiency of capital.

20. 4. Human resources
• National income also depends
upon the human resources.
• If natural resources are available
but a country is under populated
then the size of national income
will be small.
• If the labour is skilled, educated
and efficient then the size of
national income will be large.

21. 5. State of technology
• If there is a lack of technology
in any country, the size of
national income will be small.
• On the other hand, if
advances technology is
available in any country then
its size of national income will
be large.

22. 6. Entrepreneurial ability
• If this ability is available in
large number in any country,
then the size of national
income will be large.
• If any country is lacking this
ability the size of national
income will be small.

23. 7. Political stability
• If there is a political stability
in the country the production
can be maintained at the
highest level and the size of
national income will be large.
• The production is adversely
affected by political unrest.

24. 8. Spirit of work
• If the people are patriotic and they want to
develop their country then they will perform
their duties honestly and efficiency.
• In this way, they will increase national
income.

25. 9. Division of labour and
specialization
• If the scale of
production is large
then division of labour
and specialization
process will start
which is very useful in
increasing the
production of the
country.

26. References
- Thakuri S. Bhawani. Health Economics for
nurses. Second edition.Kathmandu:Medhavi
publication,2016.81-94
- Nipun S. Factors Affecting National
Income:5factors [document on the
internet].Economics Dicussion;2014[cited
2019 October 2019]. Available from :
https://www.economicsdiscussion,net/nation
al_income/factors/