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Factor cost or national income by type of income is a measure of national income or output based on the cost of factors of production, instead of market prices. This allows the effect of any subsidy or indirect tax to be removed from the final measure. [1] The concept of factor cost is focusing on the cost incurred on the factor of production.
A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), Gross national income (GNI), net national income (NNI), and adjusted national income (NNI adjusted for natural resource depletion – also called as NNI at factor cost).
Gross national product (GNP) is the market value of all the goods and services produced in one year by labor and property supplied by the citizens of a country. Unlike gross domestic product (GDP), which defines production based on the geographical location of production, GNP indicates allocated production based on location of ownership.
The sum of the gross value added in the various economic activities is known as "GDP at factor cost". GDP at factor cost plus indirect taxes less subsidies on products = "GDP at producer price". For measuring the output of domestic product, economic activities (i.e. industries) are classified into various sectors.
Net national income is defined as gross domestic product plus net receipts of wages, salaries and property income from abroad, minus the depreciation of fixed capital assets (dwellings, buildings, machinery, transport equipment and physical infrastructure) through wear and tear and obsolescence. [2] It can be expressed as [3]
Seven summary accounts are published, as well as a much larger number of more specific accounts. The first summary account shows the gross domestic product (GDP) and its major components. The table summarizes national income on the left (debit, revenue) side and national product on the right (credit, expense) side of a two-column accounting report.
So for wage earners as consumers, an appropriate way to measure real wages (the buying power of wages) is to divide the nominal wage (after-tax) by the growth factor in the CPI. Gross domestic product (GDP) is a measure of aggregate output. Nominal GDP in a particular period reflects prices that were current at the time, whereas real GDP ...
In microeconomics, the marginal factor cost (MFC) is the increment to total costs paid for a factor of production resulting from a one-unit increase in the amount of the factor employed. [1] It is expressed in currency units per incremental unit of a factor of production (input), such as labor , per unit of time.