Q2Managerial Economics & Financial Accounting
Question
2 marks
How is disposable income different from personal income?
Answer
Personal income is total gross income, while disposable income is the net amount left after paying personal direct taxes.
- Personal Income (PI): This is the total gross income actually received by individuals and households from all sources before any taxes are paid.
- Disposable Income (DI): This is the net income left in the hands of individuals after paying personal direct taxes (like Income Tax). It is the true amount of money households have available to either consume or save. ().