Question

In a single day Raju, the barber, collects Rs. 500 from haircuts; over this day, his equipment depreciates in value by Rs. 50. Of the remaining Rs. 450, Raju pays sales tax worth Rs. 30, takes home Rs. 200 and retains Rs. 220 for improvement and buying of new equipment. He further pays Rs. 20 as income tax from his income. Based on this information, complete Raju's contribution to the following measures of income:

(a) Gross Domestic Product

(b) NNP at Market Price

(c) NNP at Factor Cost

(d) Personal Income

(e) Personal Disposable Income.

Answer 1

Given Indirect taxes = Rs. 30, Personal tax = Rs. 20

Depreciation Rs. 50, Retained earnings = Rs. 220

$\therefore {\text{GDP}}_{MP}$ = Rs. 500

${\text{NNP}}_{MP}$ = ${\text{GDP}}_{MP}$ - Depreciation

= 500 - 50 = Rs. 450

${\text{NNP}}_{FC}$ = ${\text{NNP}}_{MP}$ - NIT

= 450 - 30 = Rs. 420

Personal Income = ${\text{NNP}}_{FC}$ - Retained earnings

= 420 - 220 = Rs. 200

Personal Disposable Income = Personal Income - Direct tax

= 200 - 20 = Rs.180