Page 38 - DECO402_Macro Economics

Unit-3: Economic Welfare and National Income

It is possible that due to increase in national income, per capita income also increases but Notes
if increase is national income due to capital goods and short of consumer goods due to less
production of that then increment is both national and per capita income, there will be no
increment is economic welfare because people’s economic welfare depends upon consumptions
of goods, not on capital goods. Similarly in war time when national and per capita income
is much increases, nevertheless economic welfare do not increase because in war period all
production of a country employed in war material and seems less is consumer goods so that
people’s standard of living deteriorated and economic welfare become less.
Generally increasing is national and per capita income, economic welfare is less than before.
It is happen then increase in national income, rich class income rise and poor do not get any
benefit of that. Means increasing in national income rich become richer and poor become more
poor. This when the welfare of riches increases, pours decrease because poor is more in number
than rich, hence total economic welfare falls.
Finally, increasing is national income whatever effects an economic welfare that depends upon
that matter how people expenses? If people expenses increasing income on efficiency growing
needs as milk, ghee, fans etc. then economic welfare will be increased. But just contrary expenses
on harmful goods as a drinking, gambling etc. then economic welfare will be decreased. In
fact, increment is national income, increasing and decreasing in economic welfare depends
upon changing is interest of people. If changing in fashion and tastes towards consumption of
good things then economic welfare increase, otherwise consumption of bad things decrease
economic welfare.
It is cleared from above discussion that although there is a close connection between national
income and economic welfare, rather than it can not be said surely that increasing is national
and per capita income will be increased is economic welfare. Increasing is national income,
increase or decrease of economic welfare depends upon a number of factors as a population’s
increment rate, methods of income earning, conditions of works, types of expenses, fashion,
tastes etc.
2. ‘Changing’ in the distribution of national income is of two types. Firstly, transfers of wealth
from poor to rich. Secondly, from rich to poor. When increasing to national income transfers
of wealth is of first type then economic welfare is decreased. When it happen so, government
is benefited to rich classes and is imposed regressive tax on poor.
The actual relationship between distribution of national income and economic welfare is of
second types of transfers, when wealth floes from rich to poor. National income’s redistribution
in favour of poor’s can be done by decreasing the wealth of rich increasing the income of poor’s.
The income of rich class can be less through a number of methods as a impure progressive
tax on income and wealth, controlling on monopoly, national siation of social services and
impose tax an dear and luminous goods used by riches. Just its opposite, income of poor can
be increased by a number of methods as fixing of minimal wages, increasing the production of
goods used by poor, fix the price of such a goods, giving financial aid to producer, distribution
of goods by cooperative stores and giving free education, social security and lodging facility at
low rent by aforesaid measures when distribution of national income in favour of pours, then
economic welfare increases. Pigou has expressed this thought in this words, "Any one cause,
which increases areas income’s major part is favour of poor, if from any point of view does not
less the size of national dividend, then generally will increase economic welfare".
But it is not necessary that equal distribution of national income increases economic welfare.
Just its contrary if policies following towards riches are not rational then it is much possibility
of decreasing is economic welfare. Imposing high rate of progressive tax capital investment, so
that national income falls. Similarly by government efforts when poor’s income increases, but
if spends this increased income on wine and gambling etc. on bad things or their population

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