Posted by linda on .
Why is an economy's output, in essence, is also its income?
Its really the VALUE of an economy's output is also its income.
Think of a simple example, then expand. Consider a barber who gives 20 hair cuts a day and charges $10 each. The value of the barber's output is 20*$10 =$200. But that is also his daily income.
Now consider a dress maker, who buys $10 worth of cloth to make a dress which sells for $210. Total output is $210. However the income of the dress maker is only $200. The missing $10 is a part of the output/income of the seller of the cloth. So, again the value of total output= total income.
Everything that is produced and sold is total output. It is also the income of the producers and sellers
I hope this helps.