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Wednesday, 18 May 2011

Factors which determine the volume of national income


The prosperity of any country depends upon the large size of national income. While the size of national income depends upon the following factors :

1. Natural resources :-
Natural resources are those which are God gifted like land, minerals, rivers, mountains and climate. If any country is rich in natural resources, its national income will be greater . So the national income volume depends upon the natural resources.

2. Man made sources :-
Roads, Canals, Buildings, Railway, Factories are man made sources are in large number then the size of national income will be greater.

3. Capital :-
Capital is considered the life blood for the modern economy. The volume of production depends upon the quality and quantity of capital available in the country. "Poor country is poor because it is poor." Under developed countries per capita income is low because there is deficiency of capital.

4. Human resources :-
National income also depends upon the human resources. If natural resources are available but a country is under populated then the size of national income will be small. If the labour is skilled, educated and efficient then the size of national income will be large.

5. State of technology :-
If there is a lack of technology in any country, the size of national income will be small. On the other hand, if advance technology is available in any country then its size of national income will be large.

6. Entrepreneurial ability :-
If this ability is available in large number in any country, then the size of national income will be large. If any country is lacking this ability the size of national income will be small.

7. Political stability :-
If there is a political stability in the country, the production can be maintained at the highest level and the size of national income will be large. The production is adversely affected by thee political unrest.

8. Spirit of work :-
If the people are patriotic and they want to develop their country then they will perform their duties honestly , and efficiently. In this way they will increase the national income.

9. Division of labour and specialization :-
If the scale of production is large then division of labour and specialization process will start which is very useful in increasing the production of the country.

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