While estimating national income by the income method, how is the income of a tailor working in his own business classified?
Answer and explanation
Correct answer: Mixed income of the self-employed
A tailor who owns and works in the same business is self-employed. The total earning contains an inseparable return for personal labour, a return on the capital used in the business and entrepreneurial profit. Since these components cannot normally be measured separately, the income is recorded as mixed income of the self-employed, not as employees’ compensation or a transfer payment.
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What is the correct answer to this question?
Mixed income of the self-employed
Why is this the correct answer?
A tailor who owns and works in the same business is self-employed. The total earning contains an inseparable return for personal labour, a return on the capital used in the business and entrepreneurial profit. Since these components cannot normally be measured separately, the income is recorded as mixed income of the self-employed, not as employees’ compensation or a transfer payment.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Methods of calculating national income - Income Method.
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