Factors affecting size of national income, Managerial Economics

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Factors affecting the size of  National Income

The size of nation's income depends upon  the quantity and quality of the factor endowments at its disposal. A nation will be rich if its endowments of natural resources are large, its people are skilled, and it has a useful accumulation of capital assets.  The following points are of interest:

a)         Natural Resources

These include the minerals of the earth; the timber, shrubs and pasturage available; the agricultural potential (fertile soil,  regular  rainfall, temperature or tropical climate); the fauna and flora; the fish; crustacea etc of the rivers and sea; the energy resources, including oil, gas, hydro-electric, geothermal, wind and wave power.

b)         Human Resources

A country is likely to prosper if it has a large population; literate and numerate sophisticated and knowledgeable about wealth creating processes.  It should be well educated and skilled, with a nice mixture of theory and practice.  It should show enterprise, being inventive, energetic and determined in the pursuit of a better standard of living.

c)         Capital Resources

A nation must create and then conserve capital resources.  This includes not only tools, plant and machinery, factories, mines, domestic dwellings, schools, colleges, etc, but a widespread infrastructure of roads, railways, airports and ports.  Transport creates the utility of space.  It makes remote resources accessible and high-cost goods into low-cost goods by opening up remote areas and bringing them into production.

d)         Self-sufficiency

A nation cannot enjoy a large national income if its citizens are not mainly self-supporting.  If the majority of the enterprises are foreign -owned there will be a withdrawal of wealth in the form of profits or goods transferred to the investing nation.

e)         Political Stability


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