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Question
Distinguish between Factor Cost and Market Price.
Solution
| Factor Cost | Market Price | |
| 1. | The term factor cost refers to the prices of products as received by the producers. | MP is the market price paid by a buyer of a commodity. |
| 2. | FC = MP - NIT (NIT `->` Net indirect taxes) |
MP = FC + NIT (IT - Subsidies) |
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| Rs (crore) | ||
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| PARTICULARS | (₹ crores) | |
| (i) | Value of output | 1200 |
| (ii) | Wages and salaries | 165 |
| (iii) | Rent | 60 |
| (iv) | Subsidies | 15 |
| (v) | Mixed Income of self employed | 180 |
| (vi) | Employer's contribution to social security | 15 |
| (vii) | Value of intermediate consumption | 600 |
| (viii) | Interest | 7 |
| (ix) | Factor income earned from abroad | 15 |
| (x) | Indirect taxes | 90 |
| (xi) | Profits | 23 |
| (xii) | Depreciation | 75 |
| (xiii) | Factor income paid abroad | 30 |
