What is the national income? Explain the relationship between national income and national product.

National income is the total money value of all the goods and services produced in a country during one financial year. It includes only the economic activities that can be valued at economic prices. Such as production by farmers, firms in different industrial sectors, production of goods and services by government, services produced by business intermediaries (Wholesalers and retailers), banks and other financial institutions, educational institutes and professionals like doctors, teachers, lawyers, etc. This is greatly related to the national product.
Assume there is a two-sector economy where there is no government. This would imply that there is no imposition of taxes and grant of subsidy. We also assume that there is no concept of depreciation. In such a scenario national income and national product are the same.
The four factors of production are land, labour, capital, and entrepreneurship. The income received by different people are obtained because of their contribution to the national production. The sum of all the incomes earned as rent, wage, interest, and profit is the national income .
The total value of all the final goods and services produced by all the productive firms in one financial year is called National Product. It can be estimated by multiplying the total output of final goods and services with their prices. So, the total National output in terms of rupees or the value produced is distributed among different factors of production which have contributed to the productivity. Out of this national production, the wages will be paid to those who have sold their labour to the firms. The landowners will receive the rent, and the capitalists will receive the interest. After the payment of wages, rent and interest, the amount that is left is the profit. This is given to the entrepreneur who has this activity and bearing the risk and uncertainty involved. So it is clear that the national product is distributed among the factors of production. the