By national income of a country we mean the sum total of incomes earned by the citizens of the country during a given period of time due to their participation in the production process. It is usually measured for a year. It should be noted that national income is not the sum of all incomes earned by all individuals. Only those incomes which accrue due to participation in the production process are included in the national income total.
Individuals may participate in the production process by supplying different factors of production. There are four factors of production – land (or natural resources), human labour, man-made means of production (or capital) and organization. The payment for the use of land is known as rent. Payment for the use of human labour is known as wage and payment for the use of capital is known as interest. The factors of production – land, labour, and capital are known as primary factors of production and the corresponding payments are known as factor incomes.
Individuals may participate in the production process by supplying different factors of production. There are four factors of production – land (or natural resources), human labour, man-made means of production (or capital) and organization. The payment for the use of land is known as rent. Payment for the use of human labour is known as wage and payment for the use of capital is known as interest. The factors of production – land, labour, and capital are known as primary factors of production and the corresponding payments are known as factor incomes.
