_____ accounts for the difference between the concept of market price and factor cost in national income measurement.
Net indirect taxes
In national income accounting, the difference between market price and factor cost arises due to the presence of net indirect taxes. The formula used is:
Market Price = Factor Cost + Indirect Taxes - Subsidies
- Indirect taxes (e.g., GST, excise duty, VAT) increase the price of goods and services.
- Subsidies (e.g., government grants, fuel subsidies) reduce the market price of goods and services.
- Net Indirect Taxes = Indirect Taxes - Subsidies.
Thus, net indirect taxes account for the difference between market price and factor cost.
Important Questions from Economy
- At the time of independence, which sector contributed the largest share to India's national income?
- Which of the following is an example of soft infrastructure?
- Which of the following statements regarding the estimation of India's national and per capita income during the colonial rule is correct?
What was one of the major characteristics of India's economy at the time of independence in 1947?
- The Fiscal Responsibility and Budget Management (FRBM) Act set limits on the fiscal deficit and public debt. What was the fiscal deficit target under the original FRBM Act by 2008-09?
