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.
