Demerits of output approach in measuring national income?

1. Ignores non-market activities: The output approach only considers goods and services produced for sale in the market, ignoring non-market activities such as household work, volunteer work, and illegal activities. This can lead to an underestimation of the true value of national income.

2. Excludes intermediate goods: The output approach only includes final goods and services in its calculation of national income, excluding intermediate goods and services. This can lead to double counting if the value of intermediate goods is not properly accounted for.

3. Ignores changes in inventory levels: The output approach does not take into account changes in inventory levels, which can lead to inaccuracies in measuring national income. For example, if a company produces more goods than it sells in a given period, its inventory levels will increase, but this increase will not be reflected in the national income calculation.

4. Does not account for depreciation: The output approach does not account for depreciation of capital goods, which can lead to an overestimation of national income. Depreciation is the decrease in value of capital goods over time due to wear and tear, and it should be deducted from national income to accurately reflect the true value of output.

5. Ignores externalities: The output approach does not take into account externalities, such as environmental damage or social costs, which can affect the overall well-being of society. This can lead to an incomplete picture of the true impact of economic activity on the economy and society.

Demerits of Output Approach in Measuring National Income

1. Non-Market Activities:
- Ignores the value of unpaid household activities, such as child-rearing, housework, and volunteer work.

2. Double Counting:
- Can lead to double counting of intermediate goods, as their value is included both in the production of final goods and in the value of those final goods.

3. Ignoring External Effects:
- Fails to account for the positive or negative economic impacts that occur outside of the market, such as pollution or environmental degradation.

4. Difficulty in Measuring Quality Changes:
- New technologies and innovations may lead to improvements in product quality, which may not be fully captured in the output approach.

5. Seasonal and Irregular Variations:
- Economic activity can fluctuate significantly due to seasonal factors or irregular events, which can distort output-based measures of national income.

6. Reliance on Market Prices:
- Uses market prices to value goods and services, which may not accurately reflect their true economic value.

7. Distribution of Income:
- Does not provide information about the distribution of income among different sectors of the population.

8. Effect of Government Expenditure:
- May overstate national income if government expenditure is included, as it does not represent actual production.

9. Lack of International Comparability:
- Different countries may use different methods for measuring output, making international comparisons difficult.

10. Complexity and Data Requirements:
- Output approach can be complex to implement and requires a large amount of reliable data, which may not be readily available in all countries.