Is wheat grown by a farmer but used entirely for family’s consumption included/excluded in National Income?
Is wheat grown by a farmer but used entirely for family’s consumption included/excluded in National Income?
Anurag Pathak Changed status to publish December 8, 2023
Yes,
It is included in the national income because it adds to the current flow of goods and services. Therefore its imputed value should be included.
Let’s understand it
Wheat grown by a farmer has the market price. It would have added to the income of the farmer if the same wheat grown (used for family’s consumption) was sold in the market.
Thus total income of the farmer is
= Wheat sold in the market + Wheat used for self-consumption.
As it adds to the flow of goods in the economy. It is added to the national income of a country.
Production of the self-consumption is added to the National Income through the Production Method.
National Income = GDP at MP + NFIA.
GDP at MP = Value of Output – Intermediate Consumption.
Value of Output = Sales + change in Stock.
Sales = Sales to households + Sales to Government + Sales to other firms + Production for self-consumption.
Anurag Pathak Changed status to publish December 8, 2023
