economics

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Why is an economy's output, in essence, is also its income?

  • economics -

    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.

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