PI = NI + transfer payments — Corporate retained earnings, income taxes, social security taxes.

2.11. Disposable Personal Income (DPI)

Disposable personal income refers to the amount, which in actual is at the disposal of individuals to spend as they like. It is the amount which is left with the individuals after paying personal taxes such as income tax, property tax, professional tax etc. Therefore, Disposable Personal Income = Personal Income—Personal Taxes.

DPI = PI — Personal Taxes.

This concept is very useful for studying and understanding the consumption and saving behavior of the individuals. It is the amount, which households can spend and save.

Disposable Income = Consumption + Savings

The important equations we have discussed so far are given below:

♤ National Income = NNP at Factor Cost

♤ NNP at Factor Cost = NNP at Market Price – Net Indirect Tax

♤ NDP at Factor Cost = NDP at Market Price – Net Indirect Tax

♤ Net Indirect Taxes (NIT) = Indirect Taxes – Subsidies

♤ NNP = GNP – Depreciation

♤ NDP = GDP – Depreciation

♤ GNP = GDP + Net Factor Income from Abroad