Answer to Question #94628 in Microeconomics for Anjali Singh

Question

How does equilibrium level of income is determined? which factors do changes in the national income?

Answer 1

Equilibrium level of income means that the economy has an equal amount of production and market demand. Thus determining equilibrium income, total supply should be equal to the total demand. That is Y that IA Y(total income) = C (consumption) +I (investment) +G (government expenditure)

The formula will help determine how changes in one factor affects income levels.

Factors that have an effect on national income include The stock of factors of production--These are land, labor, capital and organization. The second factor is Labor. The third factor is Capital,which is the support system of modern industry. The fourth factor is enterprise--Thase are numbers and skills of the entrepreneurs. The fifth factor is state of technical knowledge as it influences production. political stability is the final factor affecting National Income as it affects economic progress.