personal income

Examples of personal income in the following topics:

• Personal Income

  • Personal income is an individual's total earnings from wages, investment interest, and other sources.
  • In the United States the most widely cited personal income statistics are the Bureau of Economic Analysis's (BEA) personal income and the Census Bureau's per capita money income.
  • BEA's personal income measures the income received by persons from participation in production, from government and business transfers, and from holding interest-bearing securities and corporate stocks.
  • Personal income and disposable personal income are provided both as aggregate and as per capita statistics.
  • BEA produces monthly estimates of personal income for the nation, quarterly estimates of state personal income, and annual estimates of local-area personal income .

• Disposable Income

  • Disposable income is thus total personal income minus personal current taxes .
  • Discretionary income is disposable income minus all payments that are necessary to meet current bills.
  • It is total personal income after subtracting taxes and typical expenses (such as rent or mortgage, utilities, insurance, medical fees, transportation, property maintenance, child support, food and sundries, etc.) needed to maintain a certain standard of living.
  • Discretionary income = Gross income - taxes - all compelled payments (bills)
  • Disposable income is often incorrectly used to denote discretionary income.

• Income Distribution

  • The distribution of income among the members of society, individuals and families, is called the personal distribution of income.
  • The personal distribution of income describes the allocation of income among economic agents.
  • Other social institutions such as welfare and philanthropy play a minor role in the personal distribution of income.
  • When considering income distribution by age of household, there is a "life cycle" of a person's earnings and needs that should be considered.
  • A "Lorenz Curve" can also describe the personal distribution of income.

• GDP per capita

  • Gross domestic product (GDP) per capita is the mean income of people in an economic unit.
  • Gross domestic product (GDP) per capita is also known as income per person.
  • It is the mean income of the people in an economic unit such as a country or city.
  • Per capita income is often used to measure a country's standard of living.
  • As it is a mean value, it does not reflect income distribution.

• Consumption outcomes

  • Then, disposable income increases to 200 but only consumes 180.
  • These two conclusions imply that the gap between income and consumption at all high levels of income is too wide to be easily filled by investment.
  • Autonomous saving is how much a person saves when they have no disposable income, which means that the person is generally spending more than they bring in.
  • Y stands for disposable income.
  • As savings (S) increases as disposable income (Yd) increases.

• Taxes

  • Direct Taxation: A direct tax is assessed on the income of the taxpayer and is generally collected before the taxpayer collects his wages.
  • So a person making $20,000 would pay the same rate as a person making $120,000, but would pay significantly less in real dollars.
  • Progressive Tax: The more a person earns, the higher the tax rate.
  • A person earning $20,000 would have to pay 10%, or $2,000, while a person who earns $120,000 would have to pay 20%, or $24,000.
  • Since high income earners spend a lower proportion of their income on goods and services in comparison to low income earners, the rich tend to pay proportionally less sales tax.

• Impact of Income on Consumer Choices

  • The simplest way to demonstrate the effects of income on overall consumer choice, from the viewpoint of Consumer Theory, is via an income-consumption curve for a normal good(see ).
  • The wealth effect differs slightly from the income effect.
  • For example, if a person owns a stock that appreciates in price, they perceive that they are wealthier and may spend more, even though they have not realized those gains so their income has not increased.
  • As income rises, the quantity consumed of 'X1' decreases.
  • This illustrates increased variance in consumer choice as income rises.

• National Income

  • A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region.
  • A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), gross national product (GNP), net national income (NNI), and adjusted national income (NNI* adjusted for natural resource depletion).
  • At factor cost = GDP at market price - depreciation + NFIA (net factor income from abroad) - net indirect taxes
  • The income approach equates the total output of a nation to the total factor income received by residents or citizens of the nation:
  • GDP = C + I + G + ( X - M ); where C = household consumption expenditures / personal consumption expenditures, I = gross private domestic investment, G = government consumption and gross investment expenditures, X = gross exports of goods and services, and M = gross imports of goods and services.

• Defining GDP

  • Personal expenditures fall under one of the following categories: durable goods, non-durable goods, and services.
  • The income approach looks at the final income in the country, these include the following categories taken from the U.S.
  • "National Income and Expenditure Accounts": wages, salaries, and supplementary labor income; corporate profits interest and miscellaneous investment income; farmers' income; and income from non-farm unincorporated businesses.
  • Two non-income adjustments are made to the sum of these categories to arrive at GDP:
  • The income approach, alternatively, would focus on the income made by households as one of its components to derive GDP.

• The budget constraint: balancing income, consumption, and saving across time

  • Foresight, self-control, habit, expectation of life, and or concern for the lives of others are the five personal factors that determine a person's impatience which in turn determines his time preference.
  • This may mean that a person actually spends less now than Keynesian economics would suggest otherwise.
  • Typically, a person's MPC (marginal propensity to consume) is relatively high during young adulthood, decreases during the middle-age years, and increases when the person is near or in retirement.
  • According to this hypothesis, permanent consumption is proportional to permanent income.
  • Permanent income is a subjective notion of likely medium-run future income.