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In general terms, income is the flow of money or goods accruing to an individual, a group of individuals, a firm or the economy over some time period. It may originate from the sale of productive services (as with wages, interest, profits, rent, national income); it may represent a gift (e.g. a legacy from a will or income of a trust fund) or a transfer payment, e.g. a welfare cheque. Income may be in money but also ‘in kind’, e.g. use of a company automobile by a business executive. Its essential fea ture is that it is a flow accruing to the wealth of a particular economic unit. Income is an extremely important concept in economics. The analysis of the behaviour of factors of production and firms is carried out on the assumption that they choose between alternatives in such a way as to maximize income (where the income to the owners of the firm is, of course, profit). lncome appears in the theory of consumer choice as the factor which constrains the consumer in his choice of consumption pattern; he cannot spend more on consumption than his total income and therefore must allocate his fixed income among goods in a way which maximizes his utility. Finally, the question of what determines the aggregate flow of income in the economy as a whole forms an important part of the subject matter of macroeconomics, the implication being that national income is an important determinant of social welfare.

Reference: The Penguin Dictionary of Economics, 3rd edt.