why natinal income at factor cost do not include subsidies and indirect tax?

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Solution

Factor cost is free from the impact of subsidies or indirect taxes that is why national income at factor cost does not include subsidies and indirect tax . On the other hand, when National Income is expressed in terms of market prices, indirect taxes and subsidies are taken into account. While, subsidies tend to lower the market price on the other hand, the indirect taxes tend to raise the market price.

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