From the following data, calculate Personal Income and Personal Disposable Income. Rs (crore): (a) Net Domestic Product at factor cost = 8,000; (b) Net Factor Income from abroad = 200; (c) Undistributed Profits = 1,000; (d) Corporate Tax = 500; (e) Interest Received by Households = 1,500; (f) Interest Paid by Households = 1,200; (g) Transfer Income = 300; (h) Personal Tax = 500.

From the following data, calculate Personal Income and Personal Disposable Income. Rs (crore): (a) Net Domesti

Exercises · Q9

Q. From the following data, calculate Personal Income and Personal Disposable Income. Rs (crore):

(a) Net Domestic Product at factor cost = 8,000;

(b) Net Factor Income from abroad = 200;

(d) Corporate Tax = 500;

(e) Interest Received by Households = 1,500;

(f) Interest Paid by Households = 1,200;

(g) Transfer Income = 300;

(h) Personal Tax = 500.

Puducherry CbseNCERTSubjective· 3mImportance★★★★★

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Concept understanding — Depreciation Calculation

Depreciation Calculation – A First Look

You own a smartphone you bought for ₹30,000. After a year, if you tried to sell it, you’d get maybe ₹20,000. That ₹10,000 drop isn’t a loss of cash from your pocket — it’s the wear and tear of the phone’s value. In economics, when a factory buys a machine for ₹10 lakh, that machine doesn’t stay worth ₹10 lakh forever. It rusts, breaks down, becomes outdated. The gradual loss in value is depreciation.

The Precise Meaning

In your NCERT Class 12 Macroeconomics textbook (Chapter 2, National Income Accounting), depreciation is defined as:

Depreciation is the fall in the value of a fixed asset due to normal wear and tear, passage of time, or expected obsolescence.

It is not a cash expense — no money leaves the firm when depreciation happens. But it is a cost that must be accounted for, because using a machine today reduces its future usefulness. Without depreciation, a firm would overstate its profit and a country would overstate its national income.

Why It Matters

For a firm: Depreciation is subtracted from revenue to find true profit. If you ignore it, you think you earned more than you really did.
For the economy: Gross Domestic Product (GDP) counts all final goods produced. But some of that production is just replacing worn-out machines. Net Domestic Product (NDP) = GDP – Depreciation. NDP tells us how much new value was actually added.

The Formula (NCERT Standard)

The NCERT textbook gives one standard method for calculating depreciation — the Straight Line Method. It is simple and exam-relevant.

\text{Depreciation} = \frac{\text{Cost of Asset} - \text{Scrap Value}}{\text{Estimated Life of Asset}}

Where:

Cost of Asset = purchase price + installation/transport costs (the total initial investment)
Scrap Value = the estimated resale value at the end of its life (could be zero)
Estimated Life = number of years the asset is expected to be used

Example: A machine costs ₹1,00,000, has a scrap value of ₹10,000, and a life of 10 years.

\text{Depreciation per year} = \frac{1,00,000 - 10,000}{10} = \frac{90,000}{10} = ₹9,000

Each year, the firm records ₹9,000 as depreciation. After 10 years, the machine’s book value becomes ₹10,000 (the scrap value).

A Word on Other Methods …

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National Income (NNP at factor cost) = ₹8,200 crore. Personal Income = ₹7,300 crore and Personal Disposable Income = ₹6,800 crore.

Step 1 — National Income (NNP at factor cost).

\text{NNP}_{FC} = \text{NDP}_{FC} + \text{NFIA} = 8{,}000 + 200 = 8{,}200 \text{ crore}

Step 2 — Personal Income. From National Income we remove the part firms retain (undistributed profits) and pay to government (corporate tax), and we add income households actually receive that is not part of factor income — transfer income and net interest received (interest received minus interest paid).

\text{PI} = \text{NNP}_{FC} - \text{Undistributed Profits} - \text{Corporate Tax} + \text{Transfer Income} + (\text{Interest Received} - \text{Interest Paid})

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Q.From the following data, calculate Personal Income and Personal Disposable Income. Rs (crore):

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