Personal Income part 10

Okay, here are the notes summarizing the key concepts discussed in the Telugu lecture on National Income:

Recap & Overview

1. Previous Concepts Covered: GDP, NDP, GNP, NNP.

2. Concepts to be Covered in this Session:

   • Personal Income (PI)

   • Disposable Personal Income (DPI)

   • Personal Saving (PS)

   • Per Capita Income (PCI)

3. Goal: To understand all 8 major concepts of National Income.

1. Personal Income (PI - వ్యక్తిగత ఆదాయము / వ్యష్టి ఆదాయము)

• Definition: Income actually received by individuals and households in a country from all sources before paying direct taxes. Also referred to as Micro Income (వ్యష్టి ఆదాయము).

• Distinction from National Income (NNPfc): Personal Income is NOT the same as National Income.

  • Reason 1 (Items in NI but not PI): Some income earned in the country (part of NI) doesn't reach individuals. These must be subtracted from NI.

    • Social Security Contributions (SSC - సాంఘిక భద్రతా విరాళాలు): Payments made by employees/employers towards social security schemes (like PF, insurance premiums). This is factor income earned but deducted before the individual receives it.

    • Undistributed Profits (UP - పంచిపెట్టబడని లాభాలు): Profits retained by companies and not distributed to shareholders (individuals) as dividends.

  • Reason 2 (Items in PI but not NI): Individuals receive some income that isn't generated from current productive activities (not part of NI). These must be added.

    • Transferred Payments (TP - బదిలీ చెల్లింపులు): Payments received without providing any current service in return (e.g., pensions, scholarships, unemployment benefits). Government provides these for social welfare.

• Formula:
  PI = NNP at Factor Cost - Social Security Contributions (SSC) - Undistributed Profits (UP) + Transfer Payments (TP)
  (PI = NNPfc - SSC - UP + TP)

• Note on NNPfc: NNP at Factor Cost is used as the base (National Income) because it's considered the most accurate measure reflecting income generated.

2. Disposable Personal Income (DPI - వ్యయార్హ ఆదాయము)

• Definition: The income remaining with individuals and households after paying direct taxes. This is the income available for consumption or saving. (వ్యయము చేయడానికి అర్హత కలిగిన ఆదాయము - Income eligible for expenditure).

• Direct Taxes (TD - ప్రత్యక్ష పన్నులు / వ్యష్టి పన్నులు): Taxes levied directly on the income of individuals (e.g., Income Tax).

• Formula:
  DPI = Personal Income (PI) - Direct Taxes (TD)

• Significance: Represents the actual purchasing power available to individuals.

3. Personal Saving (PS - వ్యష్టి పొదుపు)

• Definition: The part of Disposable Personal Income that is not spent on consumption.

• Consumption (C - వినియోగము): Expenditure by individuals on goods and services.

• Formula:
  PS = Disposable Personal Income (DPI) - Consumption (C)

• Relationship: DPI is either consumed or saved: DPI = C + PS

4. Per Capita Income (PCI - తలసరి ఆదాయము)

• Definition: Average income per person in a country.

• Formula:
  PCI = National Income (NNP at Factor Cost) / Total Population
  (PCI = NNPfc / Population)

• Significance: Often used as an indicator of the average standard of living.

Other Concepts Mentioned:

• Earned Income (సంపాదిత ఆదాయం): Income received from productive activities (work, business).

• Unearned Income (అసంపాదిత ఆదాయం): Income received without current productive work (rent from property, interest, transfer payments like pensions).

• Relationship between NI and PI:

  • If SSC, UP, and TP were all zero, then National Income (NNPfc) would equal Personal Income (PI). This rarely happens in reality.

Summary Flow:

1. Start with NNP at Factor Cost (National Income).

2. Subtract SSC and UP.

3. Add TP.

4. Result is Personal Income (PI).

5. Subtract Direct Taxes (TD) from PI.

6. Result is Disposable Personal Income (DPI).

7. Subtract Consumption (C) from DPI.

8. Result is Personal Saving (PS).

(Separately)
9. Calculate Per Capita Income (PCI) by dividing NNPfc by Population.