Income
Income is the consumption and savings opportunity gained by an entity within a specified timeframe, which is generally expressed in
monetary terms.[1][2][3] However, for households and individuals, "income is the sum of all the wages, salaries, profits, interest
[4]
payments, rents, and other forms of earnings received in a given period of time."
In the field of public economics, the term may refer to the accumulation of both monetary and non-monetary consumption ability,
with the former (monetary) being used as a proxy for total income.
[3]
Gross income can be defined as sum of all revenue. Net income = Revenue − Expenses.
Increase in income
Income per capita has been increasing steadily in almost every country.[5] Many factors contribute to people having a higher income
such as education,[6] globalisation and favorable political circumstances such as economic freedom and peace. Increase in income
also tends to lead to people choosing to work less hours. Developed countries (defined as countries with a "developed economy")
have higher incomes as opposed todeveloping countries tending to have lower incomes.
Contents
Economic definitions
Full and Haig-Simons income
Income inequality
Income in philosophy and ethics
Accountancy
History
See also
References
Economic definitions
In economics, "factor income" is the return accruing for a person, or a nation, derived from the "factors of production": rental income,
[7]
wages generated by labor, the interest created by capital, and profits from entrepreneurial ventures.
From labor services, as well as ownership ofland and capital.
In consumer theory 'income' is another name for the "budget constraint," an amount to be spent on different goods x and y in
quantities and at prices and . The basic equation for this is
This equation implies two things. First buying one more unit of good x implies buying less units of good y. So, is the
relative price of a unit of x as to the number of units given up in y. Second, if the price of x falls for a fixed , then its relative price
falls. The usual hypothesis is that the quantity demanded of x would increase at the lower price, the law of demand. The
generalization to more than two goods consists of modelling y as acomposite good.
The theoretical generalization to more than one period is a multi-period wealth and income constraint. For example, the same person
can gain more productive skills or acquire more productive income-earning assets to earn a higher income. In the multi-period case,
something might also happen to the economy beyond the control of the individual to reduce (or increase) the flow of income.
Changing measured income and its relation to consumption over time might be modeled accordingly, such as in the permanent
income hypothesis.
Full and Haig-Simons income
"Full income" refers to the accumulation of both the monetary and the non-monetary consumption-ability of any given entity, such as
a person or a household. According to what the economist Nicholas Barr describes as the "classical definition of income" (the 1938
Haig-Simons definition): "income may be defined as the... sum of (1) the market value of rights exercised in consumption and (2) the
change in the value of the store of property rights..." Since the consumption potential of non-monetary goods, such as leisure, cannot
[3] As such, however, it is criticized for being unreliable,
be measured, monetary income may be thought of as a proxy for full income.
i.e. failing to accurately reflect affluence (and thus the consumption opportunities) of any given agent. It omits the utility a person
may derive from non-monetary income and, on a macroeconomic level, fails to accurately chart
social welfare. According to Barr, "in
practice money income as a proportion of total income varies widely and unsystematically. Non-observability of full-income prevent
a complete characterization of the individual opportunity set, forcing us to use the unreliable yardstick of money income.
Income inequality
Income inequality refers to the extent to which income is distributed in an uneven manner. It can be measured by various methods,
including the Lorenz curve and the Gini coefficient. Economists generally agree that certain amounts of inequality are necessary and
ficiency problems and social injustice.[3]
desirable but that excessive inequality leads to ef
National income, measured by statistics such as the Net National Income (NNI), measures the total income of individuals,
corporations, and government in the economy
. For more information seemeasures of national income and output.
Income in philosophy and ethics
Throughout history, many have written about the impact of income on morality and society. Saint Paul wrote 'For the love of money
is a root of all kinds of evil:' (1 Timothy 6:10 (ASV)).
Some scholars have come to the conclusion that material progress and prosperity, as manifested in continuous income growth at both
the individual and the national level, provide the indispensable foundation for sustaining any kind of morality. This argument was
explicitly given by Adam Smith in his Theory of Moral Sentiments, and has more recently been developed by Harvard economist
Benjamin Friedman in his book The Moral Consequences of Economic Growth.
Accountancy
The International Accounting Standards Board (IASB) uses the following definition: "Income is increases in economic benefits
during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in
equity, other than those relating to contributions from equity participants." [F
.70] (IFRS Framework).
According to John Hicks' definitions, income "is the maximum amount which can be spent during a period if there is to be an
[8]
expectation of maintaining intact, the capital value of prospective receipts (in money terms)”.
History
John Hicks used "I" for income, but Keynes wrote to him in 1937, "after trying both, I believe it is easier to use Y for income and I
for investment." Some consider Y as an alternative letter for the phonem I in languages like Spanish,[9] although Y as the "Greek I"
was actually pronounced like the modern German ü or the phonetic /y/.
See also
Basic income
Comprehensive income
Income tax
Unpaid workers
References
1. Smith's financial dictionary. Smith, Howard Irving. 1908. Income is defined as, "Revenue; the amount of money
coming to a person or a corporation (usually interpreted as meaning annually) whether as payment for services or as
interest or other profit from investment."
2. Webster's new modern English dictionary , illustrated. Webster, Noah. 1922. Income is defined as "the gain which
proceeds from labor, business, property or capital; annual receipts of a person or corporation."
3. Barr, N. (2004). Problems and definition of measurement. In Economics of the welfare state. New York: Oxford
University Press. pp. 121–124
4. Case, K. & Fair, R. (2007). Principles of Economics. Upper Saddle River, NJ: Pearson Education. p. 54.
5. "Gapminder World" ([Link]
0;stl=t;
st=t;nsl=t;se=t$wst;tts=C$ts;sp=5.59290322580644;ti=2007$zpv;v=0$inc_x;mmid=XCOORDS;iid=0AkBd6lyS3Empd
Ho5S0J6ekhVOF9QaVhod05QSGV4T3c;by=ind$inc_y;mmid=YCOORDS;iid=rdCufG2vozTpKw7TBGbyoWw;by=ind
$inc_s;uniValue=8.21;iid=phAwcNAVuyj0XOoBL_n5tAQ;by=ind$inc_c;uniValue=255;gid=CATID0;by=grp$map_x;sc
ale=log;dataMin=58;dataMax=108111$map_y;scale=lin;dataMin=26;dataMax=56$map_s;sma=49;smi=2.65$cd;bd=
0$inds=). Gapminder Foundation.
6. "Gapminder World" ([Link]
0;stl=t;
st=t;nsl=t;se=t$wst;tts=C$ts;sp=5.59290322580644;ti=2007$zpv;v=0$inc_x;mmid=XCOORDS;iid=0AkBd6lyS3Empd
Ho5S0J6ekhVOF9QaVhod05QSGV4T3c;by=ind$inc_y;mmid=YCOORDS;iid=pyj6tScZqmEdrsBnj2ROXAg;by=ind$i
nc_s;uniValue=8.21;iid=phAwcNAVuyj0XOoBL_n5tAQ;by=ind$inc_c;uniValue=255;gid=CATID0;by=grp$map_x;scal
e=log;dataMin=58;dataMax=108111$map_y;scale=lin;dataMin=8.7;dataMax=100$map_s;sma=49;smi=2.65$cd;bd=
0$inds=). Gapminder Foundation.
7. Staff (2012). "factor income" ([Link]
[Link]. WebFinance, Inc. Retrieved 20 June 2012.
8. "Oxbridge Notes" ([Link]
valuation/samples/5-hicks-income). Retrieved 18 August 2016.
9. "Why Y?" ([Link] Greg Mankiw's Blog. December 21, 2016.
D. Usher (1987). "real income," The New Palgrave: A Dictionary of Economics, v. 4, pp. 104–5
Retrieved from "[Link]
"
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