Question

Can the net factor income from abroad be negative?

Answer 1

Yes, net factor income from abroad is negative. National Product at Market Prices refers to the value of final goods and services produced by the normal residents of a country in a year, calculated at market prices (i.e., the price consumers pay, including taxes).

National Product at Factor Cost, or National Income, refers to the sum of all factor payments (like wages, rent, interest, and profits) made to the owners of production inputs, excluding indirect taxes and including subsidies.

Example:

If wheat costs ₹50 to produce (factor cost), and the government subsidises it by ₹3 per kg for consumers to buy it at ₹37, the market price becomes ₹47. This illustration shows how subsidies reduce the market price, making it lower than the factor cost.