Measurement Issues
• Personal income, the flow of payments to persons for use of the input factors, such as labor, land, capital provides a conceptually attractive measure of purchasing power. Income, which is commonly measured deviates form purchasing power in several important ways
o Not all wealth is full reflected in measure income
o Government tax and transfer programs alter the amount of disposable income. Ex. Deductions and other adjustments made to arrive at taxable income imply that taxpayers with the same pre-tax income have very different disposable incomes.
o Individuals consume as member of a household, however not all members contribute income toward the consumption