The income approach is an evaluation methodology used for real estate estimated that is computed by dividing the capitalization tariff or price by the net operating income of the rental payments. Investors use this computation to value properties based on their profitability.
This methodology approaches national income from allocation facet. To put it in other words, this methodology quantifies national income at the stage of allocation and appears as income paid or received by individuals of the nation. Hence, under this methodology, national income is attained by adding up of the earnings of all individuals of a nation. Individuals earn by contributing their own services and the services of their property such as land and capital to the national production.
Also Read:Â Circular Flow Of Income In Two Sector Economy
Hence, national income is computed by summing up the rent of a land, salaries of employees and wages, interest on capital, surplus profits of entrepreneurs (including unallocated corporate profits) and earnings of self-employed people. This methodology of evaluating national income has the great advantage of manifesting the allocating of national income among different earning groups such as:
- Workers
- Landlords
- Entrepreneurs
- Owners of capital
As mentioned earlier, the sum of final expenditures in the economy must be equivalent to the income received by all the factors of manufacturing taken together. This follows from the simple notion that the revenues earned by all the enterprises put together must be allocated among the factors of manufacturing as profits, salaries, interest earnings, wages, and rents.
| Q.1- Calculate NDP at FC by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| 1 | Income from Domestic Product Accruing to Private Sector | 4000 |
| 2 | Income from Domestic Product Accruing to Public Sector | 2000 |
| Q.2- Calculate NDP at FC by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| (i) | Compensation of Employees | 1000 |
| (ii) | Operating Surplus | 2000 |
| (iii) | Mixed-Income of Self employed | 5000 |
| (iv) | Income from Domestic Product Accruing to Public Sector | 10000 |
| Q.3- Calculate NDP at FC by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| 1 | Income from Domestic Product Accruing to Private Sector | 14000 |
| 2 | Savings of Non-Departmental Enterprise | 12000 |
| 3 | Income from profit and Entrepreneurship to government administrative departments | 23000 |
| Q.4- Calculate NDP at FC by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| 1 | Compensation of Employees | 3000 |
| 2 | Operating Surplus | 2000 |
| 3 | Mixed-Income of Self employed | 1000 |
| 4 | Savings of Non-Departmental Enterprise | 4000 |
| 5 | Income from profit and Entrepreneurship to government administrative departments | 5000 |
| Q.5- Calculate NDP at FC by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| (i) | Compensation of Employees | 3165 |
| (ii) | Income from Property | 2375 |
| (iii) | Income from Entrepreneurship | 1567 |
| (iv) | Mixed-Income of Self employed | 4363 |
| (v) | Savings of Non-Departmental Enterprise | 5770 |
| (vi) | Income from profit and Entrepreneurship to government administrative departments | 2530 |
| Q.6- Calculate NDP at FC by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| 1 | Wages | 2100 |
| 2 | Rent | 5300 |
| 3 | Interest | 1500 |
| 4 | Profit | 1100 |
| 5 | Mixed-Income of Self employed | 5590 |
| 6 | Savings of Non-Departmental Enterprise | 2410 |
| 7 | Income from profit and Entrepreneurship to government administrative departments | 8000 |
| Q.7- Calculate NDP at FC by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| (a) | Wages and Salaries | 32100 |
| (b) | Rent | 52300 |
| (c) | Royalty | 12500 |
| (d) | Interest | 10100 |
| (e) | Corporate Tax | 50590 |
| (f) | Dividend | 20410 |
| (g) | Undistributed Profit | 81000 |
| (h) | Mixed-Income of Self employed | 12110 |
| (i) | Savings of Non-Departmental Enterprise | 5190 |
| (j) | Income from profit and Entrepreneurship to government administrative departments | 15500 |
| Q.8- Calculate Domestic Income and National Income by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| (i) | Compensation of Employees | 3000 |
| (ii) | Income from Property | 2000 |
| (iii) | Income from Entrepreneurship | 1500 |
| (iv) | Mixed-Income of Self employed | 4500 |
| (v) | Savings of Non-Departmental Enterprise | 5000 |
| (vi) | Income from profit and Entrepreneurship to government administrative departments | 2000 |
| (vii) | Depreciation | 1000 |
| (viii) | Net Indirect Taxes | 500 |
| (ix) | Net Factor Income from Abroad | 1000 |
| Q.9- Calculate NDP at FC and NNP at FC by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| 1 | Wages | 2000 |
| 2 | Salaries | 1000 |
| 3 | Employers’ contribution to Social Security Schemes | 500 |
| 4 | Rent | 1000 |
| 5 | Interest | 1500 |
| 6 | Profit | 1000 |
| 7 | Mixed-Income of Self employed | 2500 |
| 8 | Savings of Non-Departmental Enterprise | 4000 |
| 9 | Income from profit and Entrepreneurship to government administrative departments | 5000 |
| 10 | Depreciation | 1000 |
| 11 | Indirect Taxes | 1500 |
| 12 | Subsidies | 500 |
| 11 | Factor Income from Abroad | 2000 |
| 13 | Factor Income to Abroad | 500 |
| Q.10- Calculate NDP at FC and NNP at FC by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| (i) | Wages & salaries | 2000 |
| (ii) | Rent | 1000 |
| (iii) | Operation Surplus | 3000 |
| (iv) | Interest | 1500 |
| (v) | Compensation of employees | 4000 |
| (vi) | Mixed-Income of Self employed | 2500 |
| (vii) | Savings of Non-Departmental Enterprise | 4000 |
| (viii) | Income from profit and Entrepreneurship to government administrative departments | 5000 |
| (ix) | Depreciation | 1000 |
| (x) | Indirect Taxes | 1500 |
| (xi) | Subsidies | 500 |
| (xii) | Factor Income from Abroad | 2000 |
| (xiii) | Factor Income to Abroad | 500 |
| Q.11- Calculate NDP at FC and NNP at FC by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| 1 | Wages and Salaries | 4000 |
| 2 | Rent & Royalty | 2000 |
| 3 | Compensation of Employees | 5000 |
| 4 | Interest | 6000 |
| 5 | Corporate Tax | 1000 |
| 6 | Profit | 4000 |
| 7 | Undistributed Profit | 1000 |
| 8 | Mixed-Income of Self employed | 2000 |
| 9 | Savings of Non-Departmental Enterprise | 3000 |
| 10 | Income from profit and Entrepreneurship to government administrative departments | 5000 |
| 11 | Net Factor Income to Abroad | 1000 |
| 12 | Subsidies | 1000 |
| 13 | Consumption of Fixed Capital | 500 |
| 14 | Employees’ contribution to Social Security Schemes | 1000 |
| Q.12- Calculate NDP at FC and NNP at FC by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| (a) | Wages and Salaries | 1000 |
| (b) | Rent | 2000 |
| (c) | Royalty | 2500 |
| (d) | Interest | 1000 |
| (e) | Corporation Tax | 2100 |
| (f) | Dividend | 900 |
| (g) | Undistributed Profit | 550 |
| (h) | Mixed-Income of Self-employed | 450 |
| (i) | Savings of Non-Departmental Enterprise | 3000 |
| (j) | Income from profit and Entrepreneurship to government administrative departments | 1000 |
| (k) | Net Factor Income from Abroad | 1000 |
| (l) | Factor Income to Abroad | 500 |
| (m) | Net Indirect Taxes | 500 |
| (n) | Consumption of Fixed Capital | 200 |
| (o) | Subsidies | 700 |
| (p) | Employers’ contribution to Social Security Schemes | |
| Q.13- Calculate Domestic Income and National Income by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| 1 | Factor Income to Abroad | 11000 |
| 2 | Rent | 21000 |
| 3 | Royalty | 12500 |
| 4 | Subsidies | 10100 |
| 5 | Tax by Companies | 1100 |
| 6 | Income from profit and Entrepreneurship to government administrative departments | 9000 |
| 7 | Retained Profits | 11500 |
| 8 | Mixed-Income of Self employed | 14500 |
| 9 | Factor Income from Abroad | 20000 |
| 10 | Income from Domestic Product Accruing to Public Sector | 19000 |
| 11 | Dividend | 11000 |
| 12 | Depreciation | 1500 |
| 13 | Indirect Taxes | 5000 |
| 14 | Interest | 2000 |
| 15 | Wages and Salaries | 11800 |
| Q.14- Calculate GDP at MP, NNP at MP, GDP at FC, NDP at FC, NNP at FC by using Income Method | ||
| S. No | Items | Amount
(` In Crores) |
| (a) | Factor Income from Abroad | 1000 |
| (b) | Rent | 2000 |
| (c) | Royalty | 2500 |
| (d) | Subsidies | 1000 |
| (e) | Tax by Corporate Sector | 100 |
| (f) | Savings of Non-Departmental Enterprise | 900 |
| (g) | Undistributed Profit | 1550 |
| (h) | Mixed-Income of Self-employed | 1450 |
| (i) | Net Factor Income to Abroad | 3000 |
| (j) | Income from Domestic Product Accruing to Public Sector | 1900 |
| (k) | Dividend | 1000 |
| (l) | Consumption of Fixed Capital | 500 |
| (m) | Net Indirect Taxes | 5100 |
| (n) | Interest | 2100 |
| (o) | Wages and Salaries | 1700 |
| ANSWER KEY-INCOME METHOD | |
| Q.1 | NDP at FC=` 6000 crores |
| Q.2 | NDP at FC=` 18000 crores |
| Q.3 | NDP at FC=` 49000 crores |
| Q.4 | NDP at FC=` 15000 crores |
| Q.5 | NDP at FC=` 19770 crores |
| Q.6 | NDP at FC=` 26000 crores |
| Q.7 | NDP at FC=` 291800 crores |
| Q.8 | NDP at FC=` 18,000 crores , NNP at FC=` 19,000 crores |
| Q.9 | NDP at FC=` 18,500 crores , NNP at FC=` 20,000 crores |
| Q.10 | NDP at FC=` 18,500 crores , NNP at FC=` 20,000 crores |
| Q.11 | NDP at FC=` 27,000 crores , NNP at FC=` 26,0000 crores |
| Q.12 | NDP at FC=` 14,600 crores , NNP at FC=` 15,600 crores |
| Q.13 | NDP at FC=` 90,100 crores , NNP at FC=` 99,100 crores |
| Q.14 | NDP at FC=` 12,850 crores , NNPFC = ` 98,50 crores , GDP at MP=` 18,450 crores , NNP at MP=` 14,950 crores , GDP at FC=` 13,350 crores |
The above mentioned is the concept that is explained in detail about the Income Method. To know more, stay tuned to BYJU’S.
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