Thursday, 8 March 2012

MARSHAL'S DEFINITION ON NATIONAL INCOME

    "The labour and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities,material and immaterial,including services of all kinds.This is the true net annual in come or revenue of the country or national dividend."

       In this definition of the word 'net'is used to indicate the net national income which can be found only after deducting the depreciation of plant and capital from the gross national income.Further,the net income due on account of foreign investment must be added to it to find out the true net annual income or revenue of the country.
    The main defects of marshall's defination are as under:-
 1. Today, a country produces a number of commodities and services whose correct evalution becomes difficult.Thus ,we cannot get an accurate estimate of the national income of a country.
 2. There are some commodities which are used more than once.Thus,ther is a possibility that the product of such commodities may be counted twice.This will give a wrong estimate of the national income.
 3. There are some commodities which do not appear in the market and they are consumed directly by the producers.This normally happens in the case of agricultural commodities.Marshall's definition fails to provide a measure for such items.

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