Influence of alcohol on youths life Essay Example for Free

Influence of alcohol on youths life Essay Alcohol abuse among the youths has become a major concern in the recent past in various parts of the world. Alcohol is one of the most abused drugs with more than 60% of homesteads having access to alcohol. While in the past alcohol was not termed as a drug, today it is the leading cause of many deaths in the United States especially among the youths. Alcohol use and abuse by the youths has significant impact on their mental development and other health issues. Alcohol has been known to compromise the capability of a person to perform some of the normal tasks and also other complex tasks, the ability brain cells to retrieve information and it also slows information recording by the brain cells. Alcohol also has the effect of degrading coordination and slowing down reaction process. Apart from destroying the brain, alcohol abuse leads to other physical health problems as well as social and economic problems (Buddy, para 2). Currently, most youths drink due to peer influence or just to appear superior to their peers. Drinking has become a major problem in most colleges as more young people engage in alcohol drinking. In America for example, research has established that almost 50% of all students consume alcohol even before they reach their 8th grade (National Institute on Alcohol Abuse and Alcoholism (NIAAA), para 1). This trend continues as the students continue to 12th grade with the frequency at which alcohol increasing as students’ sets on adolescent and early adulthood. Some of the negative impacts associated with youth drinking include risky sexual activities, high risks to societies and individuals through road accidents and subsequent deaths, alcohol stimulated or induced brain damage, increased crime such as homicide, assaults and rapes all associated with alcohol, poor academic performance and poor general health of youths who take alcohol among other effects (National Institute on Alcohol Abuse and Alcoholism (NIAAA), para 1-2). This research paper will thus evaluate the various negative effects that alcohol abuse has on youths’ lives as well as their families and the society as a whole. Effects of alcohol abuse on youths As mentioned earlier, alcohol abuse is the leading cause of deaths in the United States as well as other parts of the world. Unlike in the past where terminal illnesses were ranked as the first killers in the world, today alcohol has been identified as the major killer around the world a scenario which has been attributed to the exposure of individuals to alcohol. Alcohol is one of the oldest drugs in the world. However, its abuse especially among the youths has increased in the recent past and its effects are felt across all nations (Felsted, pp 16). One of the major impacts of alcohol abuse on youth’s lives is that it interferes with the normal development process of the brains. Current research has established that brain development continues through the early twenties in a person. However, the pre-frontal cortex which is the part which is responsible for controlling cognitive ability and reasoning develops later in life as it takes a longer time to mature. Drinking in the early ages by a person (before the complete development and maturity of the brain) thus affects a person memory as it damages the region of the pre frontal cortex. Most of the youths who begin drinking do so at tender ages when their brain cells are still at the development stages. Brain cells develop when individuals are young and excessive drinking interferes with this development making young people more ineffective and unproductive. Research has established that most of the youths start drinking before the age of 16 (Barnes Brown, pp 45). During this period, it is the time when brain cells fully mature and intoxication with alcohol reduces or interferes with hormone release and functioning. Excessive use of alcohol reduces the capability of the brain to coordinate and integrate information thus interfering with good decision making process (Barnes Brown, pp 45). Academic degradation is another effect of alcohol abuse amongst the youths. As mentioned above, alcohol interferes with effective brain development as well as the ability of the brain to integrate and coordinate information to make meaningful translation of assimilated information. The ability of a person to comprehend and perform complex tasks and also to control impulses is controlled by the pre-frontal cortex which is destroyed by early age drinking. Alcohol abuse also slows down a person’s ability to be creative and make mature and meaningful decisions. Most of the youths who abuse alcohol are in their college levels or junior classes. Due to the negative impact alcohol abuse has on brain development and concentration capability, such youths end up performing poorly in their course work. Poor academic performance has various implications both in the short run and long run life of a youth. Mostly, students who perform poorly in class or course work end up getting poor grades which in turn forces the students to retake a course or a unit. Students who are forced to retake a course usually find it to be offensive and end up dropping out of school. This has further implications in their later life as it is difficult to find a descent job without good grades. Also, students who perform poorly in their academics are unlikely to find good jobs to support them and their families in the future. They thus end up with blue collar jobs which are not capable of supporting them financially in the long run (Buddy, para 4-6). Poor academic performance by youths and the subsequent loss of welfare has significant impact not only to the youths but also the communities in which they live in. Youths are the energetic and creative generation which is entitled to take up community development projects and to take care of the younger ones in their families in cases where parents are old or incapacitated. When youths are involved in alcohol abuse, they are unable to bring development in their communities thus affecting the overall development of these areas. Also, the government loses out as there are few youths to employ in more sophisticated careers thus end up importing professionals which can be costly. Alcohol has not only destroyed the future lives of youths but it has also destroyed the welfare of the families, societies and the overall economic growth of a country (Barnes Brown, pp 76). Another negative impact of alcohol abuse among the youths is that it leads to loss of jobs thus economic welfare. Alcohol is very addictive and once addicted; a person becomes alcohol dependence and cannot work effectively without it. Once in the blood stream, alcohol changes the normal functioning systems and makes it to become dependent on alcohol for functioning. Most of the young adults have lost some prestigious jobs due to alcohol addiction and abuse. Once fully addicted, a person cannot perform his or her duties and thus end up being retrenched or laid off from their work places. Loss of economic welfare renders a person incapable of feeding and taking care of his or her family leading to marital problems which may even lead to divorce or separation. Domestic violence associated with alcohol and drug abuse is the main reason given by most people while filing for a divorce. Alcoholics tend to become violent and unruly which have negative impacts on the children development. Most children who are brought up in families characterized by domestic violence tend to become reserved and perform poorly in class and they may even become violent later in their lives. Young married couples who abuse alcohol are more likely to raise unhealthy families and are even more likely to be violent and disorderly (NIAAA, para 5). Alcohol abuse among the youths also leads to increased crime and homicide cases. In America for example, over 36% cases of homicide which are reported are related to alcohol intoxication and abuse. 0% of these cases are reported to have been committed by young persons under the age of 25 years whose history verify excessive use of alcohol (Felsted, pp 22). Alcohol has different effects on adults and youths which make these two groups of individuals to behave different while under its effects. In adults, alcohol acts as a sedative which makes the adults to be more controlled even after they are totally drunk. On the contrary, alcohol acts as a stimulator for young people which make them to drink past the necessary or legal limits. Alcohol brings some kind of energy in young people which stimulates them to do things they would rather not do while sober. This explains why more homicide cases which are reported to be carried out by young people are linked to alcoholism. Other crimes which are commonly committed by young persons while under the influence of alcohol include rape cases, assaults and robberies. In America for example, over 45% of all rape cases are committed by young adults between the ages of 19 and 23 years while 44% of robberies and over 35% of assaults are all alcohol related. This is still the trend in most of the colleges where over 90% of all college rapes and violence are directly related to alcohol abuse. Most of the young persons who are imprisoned for homicide cases and rape cases attribute their actions to alcohol intoxication (Felsted, pp 25). Alcohol abuse amongst the youths is also an avenue through which most of the young persons are introduced to hard drugs such as cocaine, brown sugar, heroine and bhang. Young people are usually very eager and anxious to try out new things and love being adventurous. However, under the influence of alcohol, they become more vulnerable to be introduced to other dangerous drugs which are more fatal to their health as well as their lives. Under the influence of alcohol, young people are unable to make rational decisions which make it easy for them to fall prey of hard drugs abuse. Most of the young people who are today addicted to drugs say they were first introduced to such drugs during a drinking spree. Once introduced to such drugs, it becomes difficult to quit and even treat. Other health complications may arise which may not only be costly to treat but may lead to death. Drug addiction is hard to quit hence it can easily destroy the live of the youth (Barnes Brown, pp 109). Death is also another negative impact of alcohol on youths today. Alcohol intoxicates the mind making a person to act and behave irrationally. As already mentioned, youths are in their development stages and they are very energetic, curious and explorative. Unlike their counterpart adults, they tend to make decisions at impulse without thinking of the consequences that may accrue. Most of the youths who commit suicide are said to have prior being intoxicated with alcohol and other drugs. Alcohol is a leading cause of suicide cases which are reported around the world. Apart from suicide, most youths also meet their death while driving under the influence of alcohol. It is normal for the youths to explore and try out different things to satisfy their curiosity. Drinking is one of the means of doing this and at times they end up driving under this condition. This is dangerous as a person is not mentally and physically stable to drive which leads to major road accidents and deaths. Accidents caused by driving under the influence of alcohol are usually fatal and may cause further harm to other motorists and pedestrians as well. Families end up losing their children in such accidents all due to alcohol abuse. Another influence of alcohol on youths is that it leads to increased sexual activity amongst the youths which exposes them to dangers of contracting sexually transmitted diseases some of which may be terminal such as AIDS. Alcohol intoxicates a person and hinders rational thinking and decision making. Under the influence of alcohol, youths engage in sexual activities without reasoning or even taking precaution. This exposes or makes them vulnerable of contracting sexually transmitted diseases. Currently, most of the persons living with HIV/AIDS virus are young people and they attribute it to alcohol and drug abuse. Such diseases are terminal and before a youth realizes he or she is infected, he can pass it over to others especially when drunk. Once infected with sexually transmitted diseases especially those which are terminal, a person feels worthless and may even become ill to an extent that he or she cannot work normally or may even commit suicide. Youths who are energetic, creative and future leaders and pillars of the world thus end up dying due to alcohol abuse (NIAAA, para 7). Alcohol also leads to poverty both for the youths and their families in that once a youth becomes infected with sexually transmitted diseases; their families are forced to cater for him which requires finances. Alcohol also has other health issues in the lives of youths. Alcohol is the leading cause of liver cirrhosis and kidney failure problems. Such diseases require a lot of money to treat and usually lead to diversion of money from other family welfare issues. This may easily lead to family poverty thus further complications in family matters. Alcohol abuse among the youths also leads to stress among the family members as they try to help the addicted person. Apart from economic constraints in the family for medical care, excessive alcohol especially amongst the youths makes them to become unruly and disorderly. They may also become abusive both physically and emotionally and sometimes sexually. This may cause trauma in families and may even attract legal suits against the perpetrator. Most of the youths are incarcerated as a result of alcohol abuse. This is also costly to their families as well as the youths (Felsted, pp 43-46). Alcohol drinking by the youths also affects their reproductive and maturation systems. During puberty and adolescence, young people experience rapid growth and set the onset of maturity to adulthood. During this growth and development process, different hormones are released to aid in maturity of an individual and development of reproductive system. Alcohol destroys or tampers with the production of growth hormones thus slowing growth and development of productive organs, bones, and muscles. Excessive alcohol intake by youths especially in males can cause impotence or immaturity in development of sexual organs. Women who take excessive alcohol during their youth may also become infertile or develop other fertility complications in the future. This affects the future reproductive health of an individual as such people may become incapable of procreating. This is also a major reason for family breakups and divorces in the world (Barnes Brown, pp 116). Another heath effect of alcohol intake among the youths is that it lowers the immune system. Exposure to alcohol especially during the youthful years leads to suppression of the immune system of an individual making such a person vulnerable to illnesses and diseases. Chronic exposure to alcohol changes the pattern in which hormones are released in the body. Hormones are the ones which stimulate the immune system in the body and once they are altered, the immunity of a person is affected greatly. Low immune system exposes a person to various kinds of health risks and diseases such as liver damage (NIAAA, para 9). Alcohol abuse by youths affects their behavioral development. Usually, youths who are under the influence of alcohol tend to be rowdy and disorganized and pick fights with almost everybody even their parents and teachers. In colleges, such students’ education is terminated which may mean end of their careers and aspirations. Termination of education also means that they cannot get better paying jobs due to lack of proper school qualifications and certificates. Alcohol makes the youths behave in an immature and irresponsible manner despite where they are. Behaving irresponsibly also has legal implications on youths. Most of the rowdy youths who become a public nuisance are picked up by the authorities and may be taken to rehabilitation centers or juvenile courts. This delays their education and prolongs their time in school which in some instances can be humiliating especially when a student is schooling with younger students. Such students may end up dropping out of school which further decreases their chances of getting good jobs. Alcohol generally leads to poverty in the long run for the youths (Felsted, pp 67-68). Conclusion Youth drinking has become a major concern in most parts of the world due to the negative impact alcohol has had on the young generation. The youth comprise of over 30% of the total population and they comprise the future generational leaders. Alcohol has however changed some of the youths and corrupted their energetic and agile minds rendering such youths almost useless to the global economy. Alcohol abuse among the youths is the leading cause for their deaths, poor performance thus poor paying jobs for the youths, diversion of family financial resources to cater for huge medical bills associated with alcohol related ailments, diseases and rehabilitation costs. Effects of alcohol on youth’s awareness campaigns should be planned to ensure that the future generation is protected.

eBay Analysis Essay -- Case Study SWOT Business Model, solution

I. eBay’s Vision II. eBay’s Business Model III. Industry Analysis Background Porter’s five forces SWOT analysis IV. eBay Financials V. Summary and Recommendations I. eBay’s Vision: eBay was founded in the San Jose living room of Pierre Omidyar back in September 1995. The basic vision Omidyar had when he founded what became eBay was to create a person to person trading community based on democratic market principles; these principles allowed for a free flow of information, communication and ultimately transaction on tens of millions of items through the internet. Along with the help of Meg Whitman, a skilled branding manager, and a senior staff from such heavily branded companies as PepsiCo and Disney, they established a strong mission for the company- that eBay be a company that is in the business of connecting people, not selling them things. This founding vision set the course for eBay’s explosive growth, making it the world's online marketplace for the sale of goods and services by a diverse community of individuals and businesses. II. eBay’s Business Model Since its inception in 1995, eBay has become the market leader and innovator in the online auction industry and its brand has accordingly become synonymous with e-commerce. Rapid growth and being the first to market served eBay’s competitive strategy of differentiation well; there was really nothing like it out there: unique service, broad range of products and global reach. In addition, their target audience was quite diverse-on the buyer side you had everyone from hobbyists and collectors to the bargain hunters; on the seller side you had antique dealers, casual sellers, mom-and-pop businesses selling unique items and finally large well-known corporations liquidating their inventory. Buyers and sellers are brought together in a manner where sellers are permitted to list items for sale, buyers to bid on items of interest and all eBay users to browse through listed items in a fully automated way. The items are arranged by topics, where each type of auction has its own category . In terms of its core compentencies, eBay has both streamlined and globalized traditional person-to-person trading in the national and international arena, which had typically been conducted through such forms as garage sales, collectibles shows, flea markets and more, with their web interfac... ...ompetition. eBay has proven itself successful as the first to market-it should use its experience to be the first to market in places like India or Poland. Exhibit 1. SWOT analysis of eBay Strengths †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Brand image †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ability to sell unique products/product diversity †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Sheer volume of transactions †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Community and feedback forum †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Safety features †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Keen acumen in managing the value chain †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Senior management †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Strong financials-revenue growth, profit margin, stock price, etc. †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  First to market  Ã‚  Ã‚  Ã‚  Ã‚  Weaknesses †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Inability to sell at high volumes †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Slower response to infrastructure overload †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Fraud cases/nonpayment to sellers Opportunities †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Value chain partners/alliances/acquisitions †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Developing nations going online †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Their wider view of market penetration †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Fixed price transaction  Ã‚  Ã‚  Ã‚  Ã‚  Threats †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Technology threats such as viruses, power outages, system overload †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Loss of market share in online auction industry †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Revenue/market share loss due to fixed price auctions †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  High profile fraud cases/security breaches †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Political unrest, currency volatility in developing markets

Methods for Measuring National Income

We have so far been concerned with microeconomic aspects of managerial economics. This chapter onwards, we will deal with macroeconomic aspects of managerial economics. The major aspects of macroeconomics that are generally used in business analysis, especially in analyzing and understanding business environment of the country include (i) the level and trends in national income, (ii) factors determining national income, (iii) factors and forces leading to business cycles, (iv) the trend in general lend of price, especially inflation, (v) international economic aspects, and (vi) government policies, especially fiscal and monetary policies.In this chapter, we will discuss the meaning and methods of measuring national income and the methods of measuring national income in India.10. 1 UNIT OBJECTIVESTo define national income and its importance To discuss various methods of measuring national income To describe the methods used in India for measuring national income To show the growth and trends in national income of India.10. 2 DEFINITION OF NATIONAL INCOMENational income is the final outcome of all economic activities of a nation valued in terms of money. National income is the most important macroeconomic variable and determinant of the business level and environment of a country. The level of national income determines the level of aggregate demand for goods and services. Its distribution pattern determines the pattern of demand for goods and services, i. e. , how much of which good is demanded. The trend in national income determines the trends in aggregate demand, i. e. , the demand for the goods and services, and also the business prospects. Therefore, business decision makers need to keep in mind these aspects of the national income, especially those having long-run implications.National income or a relevant component of it is an indispensable variable considered in demand forecasting. Conceptually, national income is the money value of the end result of all economic activities of the nation. Economic activities generate a large number of goods and services, and make net addition to the national stock of capital. These together constitute the national income of a ‘closed economy’—an economy which has no economic transactions with the rest of the world. In an ‘open economy’, national income includes also the net results of its transactions with the rest of the world (i. e.  , exports less imports).Economic activities should be distinguished from the non-economic activities from a national point of view. Broadly speaking, economic activities include all human activities which create goods and services that can be valued at market price. Economic activities include production by farmers (whether for household consumption or for market), production by firms in the industrial sector, production of goods and services by the government enterprises, and services produced by business intermediaries (wholesaler s and retailers), banks and other financial organizations, universities, colleges and  hospitals, etc.On the other hand, non-economic activities are those which produce goods and services that do not have any economic value. Non-economic activities include spiritual, psychological, social and political services. The non-economic category of activities also includes hobbies, service to self, services of housewives, services of members of family to other members and exchange of mutual services between neighbours. We have defined national income from the angle of product flows. The same can be defined in terms of money flows.While economic activities generate flow of goods and services, on the one hand, they generate money flows, on the other, in the form of factor payments—wages, interest, rent, profits, and earnings of self-employed. Thus, national income may also be obtained by adding the factor earnings and adjusting the sum for indirect taxes and subsidies. The national i ncome thus obtained is known as national income at factor cost. It is related to money income flows. The concept of national income is linked to the society as a whole. It differs fundamentally from the concept of private income.Conceptually, national income refers to the money value of the entire final goods and services resulting from all economic activities of the country. This is not true of private income. Also from the calculation point of view, there are certain receipts of money or of services and goods that are not ordinarily included in private incomes but are included in the national incomes, and vice versa. National income includes, for example, employer's contribution to the social security and welfare funds for the benefit of employees, profits of public enterprises, and services of owner occupied houses.But it excludes the interest on war-loans, social security benefits and pensions. There items are, however, included in the private incomes. The national income is, th erefore, not merely an aggregation of the private incomes. One can however obtain an estimate of national income by summing up the private incomes after making necessary adjustments for the items excluded from the national income.10. 3 MEASURES OF NATIONAL INCOME10. 3. 1 Gross National Product (GNP)Of the various measures of national income used in national income analysis, GNP is the most important and widely used measure of national income. It is the most comprehensive measure of the nation’s productive activities. The GNP is defined as the value of all final goods and services produced during a specific period, usually one year, plus incomes earned abroad by the nationals minus incomes earned locally by the foreigners. The GNP so defined is identical to the concept of gross national income (GNI). Thus, GNP = GNI. The difference between the two is only of procedural nature.While GNP is estimated on the basis of product-flows, the GNI is estimated on the basis of money incom e flows, (i. e. , wages, profits, rent, interest, etc. ).NOTES 10. 3. 2 Gross Domestic Product (GDP)The Gross Domestic Product (GDP) is defined as the market value of all final goods and services produced in the domestic economy during a period of one year, plus income earned locally by the foreigners minus incomes earned abroad by the nationals. The concept of GDP is similar to that of GNP with a significant procedural difference.In case of GNP the incomes earned by the nationals in foreign countries are added and incomes earned locally by the foreigners are deducted from the market value of domestically produced goods and services. In case of GDP, the process is reverse – incomes earned locally by foreigners are added and incomes earned abroad by the nationals are deducted from the total value of domestically produced goods and services.10. 3. 3 Net National Product (NNP)NNP is defined as GNP less depreciation, i. e. , NNP = GNP – Depreciation Depreciation is that pa rt of total productive assets which is used to  replace the capital worn out in the process of creating GNP. Briefly speaking, in the process of producing goods and services (including capital goods), a part of total stock of capital is used up. ‘Depreciation’ is the term used to denote the worn out or used up capital. An estimated value of depreciation is deducted from the GNP to arrive at NNP. The NNP, as defined above, gives the measure of net output available for consumption and investment by the society (including consumers, producers and the government). NNP is the real measure of the national income.NNP = NNI (net national income). In other words, NNP is the same as the national income at factor cost. It should be noted that NNP is measured at market prices including direct taxes. Indirect taxes are, however, not a point of actual cost of production. Therefore, to obtain real national income, indirect taxes are deducted from the NNP. Thus, NNP–indirect t axes = National Income.10. 3. 4 National Income:Some Accounting Relationships (a) Accounting Indentities at Market Price GNP ? GNI (Gross National Income) GDP ? GNP less Net Income from Abroad  NNP ? GNP less Depreciation NDP (Net Domestic Product) ? NNP less net income from abroad (b) Some Accounting Indentities at Factor Cost GNP at factor cost ? GNP at market price less net indirect taxes Check Your Progress 1. How is national income defined? 2. What are the measures of national income? 3. What is the difference between GNP and GDP? 4. What is meant by NNP? NNP at factor factor factor factor cost ? NNP at market price less net indirect taxes  cost ? NNP at market price less net income from abroad cost ? NDP at market price less net indirect taxes cost ? GDP at market price less Depreciation NOTES10. 4 METHODS OF MEASURING NATIONAL INCOMEFor measuring national income, the economy through which people participate in economic activities, earn their livelihood, produce goods and services and share the national products is viewed from three different angles. (1) The national economy is considered as an aggregate of producing units combining different sectors such as agriculture, mining, manufacturing, trade and commerce, etc.(2) The whole national economy is viewed as a combination of individuals and households owning different kinds of factors of production which they use themselves or sell factor-services to make their livelihood. (3) The national economy may also be viewed as a collection of consuming, saving and investing units (individuals, households and government). Following these notions of a national economy, national income may be measured by three different corresponding methods: (1) Net product method—when the entire national economy is considered as an aggregate of producing units;(2) Factor-income method—when national economy is considered as combination of factor-owners and users; (3) Expenditure method—when national econ omy is viewed as a collection of spending units. The procedures which are followed in measuring the national income in a closed economy—an economy which has no economic transactions with the rest of the world—are briefly described here. The measurement of national income in an open economy and adjustment with regard to income from abroad will be discussed subsequently. 10. 4. 1 Net Output or Value-Added Method The net output method is also called the value added method.In its standard form, this method consists of three stages: â€Å"(i) estimating the gross value of domestic output in the various branches of production; (ii) determining the cost of material and services used and also the depreciation of physical assets; and (iii) deducting these costs and depreciation from gross value to obtain the net value of domestic output†¦Ã¢â‚¬ . The net value of domestic product thus obtained is often called the value added or income product which is equal to the sum of wages, salaries, supplementary labour incomes, interest, profits, and net rent paid or accrued. Let us now describe the stages (i) and (ii) in some detail.Measuring Gross Value. For measuring the gross value of domestic product, output is classified under various categories on the basis of the nature of activities from which they originate. The output classification varies from country to country depending on (i) the nature of domestic activities; (ii) their significance in aggregate economic activities, and (iii) availability of requisite data. For example, in the US, about seventy-one divisions and subdivisions are used to classify the national output; in Canada and the Netherlands, classification ranges from a dozen to a score; and in Russia, only half a dozen divisions are used.According to the CSO publication, fifteen sub-categories are currently used in India. 300 Self-Instructional Material After the output is classified under the various categories, the value of gross output is computed in two alternative ways: (i) by multiplying the output of each category of sector by their respective market price and adding them together, or (ii) by collective data about the gross sales and changes in inventories from the account of the manufacturing enterprises and computing the value of GDP on the basis thereof.If there are gaps in data, some estimates are made thereof and gaps are filled. Estimating Cost of Production. The next step in estimating the net national product is to estimate the cost of production including depreciation. Estimating cost of production is, however, a relatively more complicated and difficult task because of nonavailability of adequate and requisite data. Much more difficult is the task of estimating depreciation since it involves both conceptual and statistical problems.For this reason, many countries adopt factor-income method for estimating their national income. However, countries adopting net-product method find some ways and means t o calculate the deductible cost. The costs are estimated either in absolute terms (where input data are adequately available) or as an overall ratio of input to the total output. The general practice in estimating depreciation is to follow the usual business practice of depreciation accounting. Traditionally, depreciation is calculated at some percentage of capital, permissible under the tax-laws.In some estimates of national income, the estimators have deviated from the traditional practice and have instead estimated depreciation as some ratio of the current output of final goods. Following a suitable method, deductible costs including depreciation are estimated for each sector. The cost estimates are then deducted from the sectoral gross output to obtain the net sectoral products. The net sectoral products are then added together. The total thus obtained is taken to be the measure of net national products or national income by net product method.10. 4. 2 Factor-Income MethodThis m ethod is also known as income method and factor-share method. Under this method, the national income is calculated by adding up all the â€Å"incomes accruing to the basic factors of production used in producing the national product†. Factors of production are conventionally classified as land, labour, capital and organization. Accordingly, the national income equals the sum of the corresponding factor earning. Thus, National income = Rent + Wages + Interest + ProfitHowever, in a modern economy, it is conceptually very difficult to make a distinction between earnings from land and capital, on the one hand, and between the earnings from ordinary labour and entrepreneurial functions, on the other. For the purpose of estimating national income, therefore, factors of production are broadly grouped as labour and capital. Accordingly, national income is supposed to originate from two primary factors, viz. , labour and capital. In some activities, however, labour and capital are joi ntly supplied and it is difficult to separate the labour and capital contents from the total earnings of the supplier.Such incomes are termed as mixed incomes. Thus, the total factor-incomes are grouped under three categories: (i) labour incomes; (ii) capital incomes; and (iii) mixed incomes. Labour Incomes. Labour incomes included in the national income have three components: (a) wages and salaries paid to the residents of the country including bonus and commission, and social security payments; (b) supplementary labour incomes including employer’s contribution to social security and employee’s welfare funds, and direct pension payments to retired employees2; (c) supplementary labour incomes in kind, e.  g. , free health and education, food and clothing, and accommodation, etc.Compensations in kind in the form of domestic servants and such other free-of-cost services provided to the employees are included in labour income. War bonuses, pensions, service grants are n ot included in labour income as they are regarded as ‘transfer payments’. Certain other categories of income, e. g. , incomes from incidental jobs, gratuities, tips etc. , are ignored for lack of data.Capital Incomes. capital earnings:NOTESAccording to Studenski, capital incomes include the following (a) dividends excluding inter-corporate dividends; (b) undistributed before-tax profits of corporations; (c) interest on bonds, mortgages, and saving deposits (excluding interests on war bonds, and on consumer-credit); (d) interest earned by insurance companies and credited to the insurance policy reserves; (e) net interest paid out by commercial banks; (f) net rents from land, buildings, etc. , including imputed net rents on owneroccupied dwellings; (g) royalties; and (h) profits of government enterprises.The data for the first two items are obtained mostly from the firms' accounts submitted for taxation purposes. But the definition of profit for national accounting purpos es differs from that employed by taxation authorities. Some adjustments in the income tax data become, therefore, necessary. The data adjustments generally pertain to (i) excessive allowance of depreciation made by the firms; (ii) elimination of capital gains and losses since these do not reflect the changes in current income; and (iii) elimination of under or over-valuation of inventories on book-value.Mixed Income. Mixed incomes include earnings from (a) farming enterprises, (b) sole proprietorship (not included under profit or capital income); and (c) other professions, e. g. , legal and medical practices, consultancy services, trading and transporting etc. This category also includes the incomes of those who earn their living through various sources as wages, rent on own property, interest on own capital, etc. All the three kinds of incomes, viz. , labour incomes, capital incomes and mixed incomes added together give the measure of national income by factor-income method.10. 4. 3 Expenditure MethodThe expenditure method, also known as final product method, measures national income at the final expenditure stages. In estimating the total national expenditure, any of the two following methods are followed: first, all the money expenditures at market price are computed and added up together, and second, the value of all the products finally disposed of are computed and added up, to arrive at the total national expenditure.The items of expenditure which are taken into account under the first method are (a) private consumption expenditure; (b) direct tax payments; (c) payments to the non-profitmaking institutions and charitable organizations like schools, hospitals, orphanages, etc. ; and (d) private savings. Under the second method, the following items are considered: (a) private consumer goods and services; (b) private investment goods; (c) public goods and services; and (d) net investment abroad. The second method is more extensively used because the data re quired in this method can be collected with greater ease and accuracy.Treatment of Net Income from Abroad.We have so far discussed methods of measuring national income of a ‘closed economy’. But most economies are open in the sense that they carry out foreign trade in goods and services and financial transactions with the rest of the world. In the process, some nations get net income through foreign trade while some lose their income to foreigners. The net earnings or loss in foreign trade affects the national income. In measuring the national income, therefore, the net  result of external transactions are adjusted to the total.Net incomes from abroad are added to, and net losses to the foreigners are deducted from the total national income arrived at through any of the above three methods. Briefly, speaking, all exports of merchandise and of services like shipping, insurance, banking, tourism, and gifts are added to the national income. And, all the imports of the co rresponding items are deducted from the value of national output to arrive at the approximate measure of national income. To this is added the net income from foreign investment.These adjustments for international transactions are based on the international balance of payments of the nations.10. 5 CHOICE OF METHODSAs discussed above, there are three standard methods of measuring the national income, viz. , net product (or value added) method, factor-income or factor cost method and expenditure method. All the three methods would give the same measure of national income, provided requisite data for each method is adequately available. Therefore, any of the three methods may be adopted to measure the national income.But all the three methods are not suitable for all the economies simply for non-availability of necessary data and for all purposes. Hence, the question of choice of method arises. The two main considerations on the basis of which a particular method is chosen are: (i) the purpose of national income analysis, and (ii) availability of necessary data. If the objective is to analyse the net output or value added, the net output method is more suitable. In case the objective is to analyse the factor-income distribution, the suitable method for measuring national income is the income method.If the objective at hand is to find out the expenditure pattern of the national income, the expenditure or final products method should be applied. However, availability of adequate and appropriate data is a relatively more important consideration is selecting a method of estimating national income. Nevertheless, the most common method is the net product method because: (i) this method requires classification of the economic activities and output thereof which is much easier than to classify income or expenditure; and (ii) the most common practice is to collect and organize the national income data by the division of economic activities.Briefly speaking, the easy avail ability of data on economic activities is the main reason for the popularity of the output method. It should be however borne in mind that no single method can give an accurate measure of national income since the statistical system of no country provides the total data requirements for a particular method. The usual practice is, therefore, to combine two or more methods to measure the national income. The combination of methods again depends on the nature of data required and sectoral break-up of the available data.10. 6 MEASUREMENT OF NATIONAL INCOME IN INDIACheck Your Progress In India, a systematic measurement of national income was first attempted in 1949. Earlier, many attempts were made by some individuals and institutions. The earliest estimate of India’s national income was made by Dadabhai Naoroji in 1867–68. Since then many attempts were made, mostly by the economists and the government authorities, to estimate India’s national income3. These estimate s differ in coverage, concepts and methodology and are not comparable.Besides, earlier estimates were mostly for one year, only some estimates covered a period of 3 to 4 years. It was therefore not possible to construct a consistent series of national income and assess the performance of the economy over a period of time. 5. What are the methods of measuring national income? 6. What is value-added method? 7. What is factor-income method of measuring national income? 8. How is income from abroad adjusted in national income?In 1949, A National Income Committee (NIC) was appointed with P. C. Mahalanobis as its Chairman, and D. R. Gadgil and V. K. R. V. Rao as members. The NIC not only highlighted the limitations of the statistical system of that time but also suggested ways and means to improve data collection systems. On the recommendation of the Committee, the Directorate of National Sample Survey was set up to collect additional data required for estimating national income. Besides, the NIC estimated the country’s national income for the period from 1948–49 to 1950–52.In its estimates, the NIC also provided the methodology for estimating national income, which was followed till 1967. In 1967, the task of estimating national income was given to the Central Statistical Organization (CSO). Till 1967, the CSO had followed the methodology laid down by the NIC. Thereafter, the CSO adopted a relatively improved methodology and procedure which had become possible due to increased availability of data. The improvements pertain mainly to the industrial classification of the activities. The CSO publishes its estimates in its publication, Estimates of National Income.Methodology used in India Currently, net output and factor income methods are used by the CSO to estimate the national income of the country. The output method is used for agriculture and manufacturing sectors, i. e. , the commodity producing sectors. For these sectors, the value added me thod is adopted. Income method is used for the service sectors including trade, commerce, transport and government services. In its conventional series of national income statistics from 1950-51 to 1966-67, the CSO had categorized the income in 13 sectors.But, in the revised series, it had adopted the following 15 break-ups of the national economy for estimating the national income; (i) Agriculture; (ii) Forestry and logging; (iii) Fishing; (iv) Mining and quarrying; (v) Large-scale manufacturing; (vi) Small-scale manufacturing; (vii) Construction; (viii) Electricity, gas and water supply; (ix) Transport and communication; (xii) Real estate and dwellings; (xiii) Public Administration and Defence; (xiv) Other services; and (xv) External transactions. The national income is estimated at both constant and current prices. 10.7 SUMMARY National income is the market value of all final goods and services produced in a country over a period of time, generally one year. In general, there are three important measures of national income, viz. , (i) GNP, (ii) GDP, and (iii) NNP. In measuring GNP, income earned abroad by the nationals is added and income earned by foreigners in the country is subtracted from national income estimates; on the contrary, a reverse process is used in estimating GDP. NNP is defined as GNP–Depreciation. Depreciation equals the loss of national capital in the process of production.There are three methods of measuring national income: (i) Value-added method, (ii) factor-income method, and (iii) expenditure method. The choice of method depends on the availability of data required for estimating national income. Often two or all the three methods are combined to estimate national income. In India, an organisation called CSO estimates the national income. It uses net output and factor income method for estimating national income. 304 Self-Instructional Material10. 8 ANSWERS TO ‘CHECK YOUR PROGRESS’1.National income is defined as t he market value of all final goods and services produced during a period of time, usually one year.2. In general, three measures of national income are used in economic and business anaylsis: (i) GNP, (ii) GDP, and (iii) NNP.3. The difference between GNP and GDP lies in the treatment of income earned abroad by nationals and income earned by foreigner in the domestic economy. In measuring GNP, income abroad by nationals is added and income earned by foreigners in the country is deducted from the value estimated. In case of GDP, a reverse process is used.4. NNP means GNP less depreciation, i. e. , the value of national capital lost in the process national production.5. There are three methods of measuring national income: (i) net product or value added method, (ii) factor income method, and (iii) expenditure method.6. Under value-added method, first gross value of national product is estimated. Then costs of material and services also depreciation are estimated. These costs are deduct ed from the gross value to arrive at national income.7. In general, factor income method follows the principle that national income = wages + rent + interest + profit. For estimating national income, however, factor incomes are classified as (i) labour income, (ii) capital income, and (iii) mixed income.8. The adjustment of income earned abroad depends on GNP and GDP estimation. In case of GNP, income earned abroad by the citizens of a country is added to the gross value. But in case of GDP, this is deducted from the gross value.10. 9 EXERCISES AND QUESTIONS1. What is the relevance of national income statistics in business decisions?  What kinds of business decisions are influenced by the change in national income?2. Describe the various methods of measuring national income. How is a method chosen for measuring national income?3. Distinguish between net-product method and factor-income method. Which of these methods is followed in India?4. Does the method of measuring national inc ome of a ‘closed economy’ differ from one followed in an ‘open economy’? How is foreign income treated in national income estimates?5. What is value-added? Explain the value-added method of estimating national income.

Ernst Fritz Schumacher A Study Of Economics As If People...

Ernst Fritz Schumacher was a British economist, born in Germany, who lived and worked during the middle of the 20th century. His work includes the development of full-employment policies during World War 2 and the planning of Britain’s post-war welfare state. He advised Britain’s nationalized coal industry for 20 years and in 1955 he was sent as an economic adviser to Burma with the aim of raising the living standards in the country. His life experiences motivated him to write Small is Beautiful: A Study of Economics as if People Mattered, a collection of essays that discuss the problems with the Western economic model and provide an alternative one which, as suggested by the title, would focus on the welfare of the ‘small’ person rather†¦show more content†¦Small is Beautiful is structured in four parts that discuss different issues of economics with an overall theme that the current system in Western nations is not sustainable and there are many ways through which it can be improved. The topic about income and capital is introduced that describes the modern world as one that is ruining itself. The problem lies in the extensive use of natural resources and treating them as income, something that people do not have to pay for and are not concerned with it. It is argued that nature is actually a capital item which must be paid for. People should understand that and start treating it as such when using resources for production as currently in the process of economic growth, the Earth and masses of people are depleted. In that sense, it is discussed what make something economic. Developed nation’s opinion on that matter is that an economic event is one that generates profit. This view of economics disregards joys in life and creates a sense that people are only working for materialistic reasons. Labour is considered as a sacrifice people have to make and are compensated for that in the form of wages. Schumacher’s view on that matter can be described through the idea of Buddhist Economics. This concept presents a metaphysical approach where people work together in order to provide benefits to the society, the function of which is to develop each individual’s