Income

In economics, "factor income" is the return accruing for a person, or a nation, derived from the "factors of production": rental income, wages generated by labor, the interest created by capital, and profits from entrepreneurial ventures.[5]

In consumer theory 'income' is another name for the "budget constraint," an amount ${\displaystyle Y}$ to be spent on different goods x and y in quantities ${\displaystyle x}$ and ${\displaystyle y}$ at prices ${\displaystyle P_{x}}$ and ${\displaystyle P_{y}}$. The basic equation for this is

${\displaystyle Y=P_{x}\cdot x+P_{y}\cdot y}$

This equation implies two things. First buying one more unit of good x implies buying ${\displaystyle {\frac {P_{x}}{P_{y}}}}$ less units of good y. So, ${\displaystyle {\frac {P_{x}}{P_{y}}}}$ is the relative price of a unit of x as to the number of units given up in y. Second, if the price of x falls for a fixed ${\displaystyle Y}$ and fixed ${\displaystyle P_{y},}$ then its relative price falls. The usual hypothesis, the law of demand, is that the quantity demanded of x would increase at the lower price. The analysis can be generalized to more than two goods.

The theoretical generalization to more than one period is a multi-period wealth and income constraint. For example, the same person can gain more productive skills or acquire more productive income-earning assets to earn a higher income. In the multi-period case, something might also happen to the economy beyond the control of the individual to reduce (or increase) the flow of income. Changing measured income and its relation to consumption over time might be modeled accordingly, such as in the permanent income hypothesis.

Income per capita has been increasing steadily in most countries.[6] Many factors contribute to people having a higher income, including education,[7] globalisation and favorable political circumstances such as economic freedom and peace. Increases in income also tend to lead to people choosing to work fewer hours. Developed countries (defined as countries with a "developed economy") have higher incomes as opposed to developing countries tending to have lower incomes.

Income inequality is the extent to which income is distributed in an uneven manner. It can be measured by various methods, including the Lorenz curve and the Gini coefficient. Many economists argue that certain amounts of inequality are necessary and desirable but that excessive inequality leads to efficiency problems and social injustice.[3]

National income, measured by statistics such as net national income (NNI), measures the total income of individuals, corporations, and government in the economy. For more information see Measures of national income and output.

Throughout history, many have written about the impact of income on morality and society. Saint Paul wrote 'For the love of money is a root of all kinds of evil:' (1 Timothy 6:10 (ASV)).

Some scholars have come to the conclusion that material progress and prosperity, as manifested in continuous income growth at both the individual and the national level, provide the indispensable foundation for sustaining any kind of morality. This argument was explicitly given by Adam Smith in his Theory of Moral Sentiments, and has more recently been developed by Harvard economist Benjamin Friedman in his book The Moral Consequences of Economic Growth.

The International Accounting Standards Board (IASB) uses the following definition: "Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants." [F.70] (IFRS Framework).

According to John Hicks' definitions, income "is the maximum amount which can be spent during a period if there is to be an expectation of maintaining intact, the capital value of prospective receipts (in money terms)”.[8]

John Hicks used "I" for income, but Keynes wrote to him in 1937, "after trying both, I believe it is easier to use Y for income and I for investment." Some consider Y as an alternative letter for the phonem I in languages like Spanish,[9] although Y as the "Greek I" was actually pronounced like the modern German ü or the phonetic /y/.

Look up income in Wiktionary, the free dictionary.

• Basic income
• Comprehensive income
• Income tax
• Unpaid work

• D. Usher (1987). "real income," The New Palgrave: A Dictionary of Economics, v. 4, pp. 104–5