Limitation or Difficulties of National Income Limitation Difficulties National Income

Limitation or Difficulties of National Income

There are lots of limitations while we measure the National Income. There are multiples way to calculate the national income and every theory has their own limitation. We face the problem due to their assumption and complex static.

Limitation or Difficulties of National Income 

Limitation of Product Method –

ü  Housewives Services – in national income, we not include the housewives services but we include the payment for servant.

ü  Middle or final goods – it is very difficult to calculate the difference between a intermediate or final goods. If we not able to clarify the difference, the possibility of doubling is increased.

ü  Illegal activities – these types of illegal activities are not to be calculated while we measuring the National Income.

ü  Consumer Services – there are lot of services which satisfied the human need like film, dance, teacher, doctor or barber but it is very difficult to calculate their income.

ü  Capital gains also not add in National income.

ü  Second hand materials (assets or goods) are also not calculated.

ü  Change in stock materials or inventory is included in NI but we not add the total materials change.

ü  Always to use a base year price index because current price change during the time so that it is not give a real picture.

Limitation of Expenditure Method –

ü  It is very difficult to calculate Government Services like police, military, admin or court etc. it is not very sure about these services that they are middle or final services.

ü  Use of durable consumer goods like car, TV, furniture etc

ü  There is lots of public expenditure like police, park, lighting, museum, water supply or river but it is very difficult to identify that these are investment or consumption. 

ü  Different types of payment or transfer like pension, unemployment or interest on loan etc.

Limitation of Income Method –

ü  Owned or rented house – a rent received always be a part of National Income but if a owner live in self occupied house how will be the calculation.

ü  Payment of wages or a part of salary in different kind like free food or house or cloths or other thing, but their calculation is very difficult.

ü  It is very difficult to calculate the income of a self employment person.

ü  There are lot of goods and services which a farmer or producer retain for self use, so calculation of these type of thing is very difficult.