Advertisements
Advertisements
Question
What are the four factors of production and what are the remunerations to each of these called?
Solution
The four factors of production are :-
1. Land :- It denotes the natural resources like air, water, soil, etc. The payment that is paid by the firms to acquire these services is called rent.
2.Labour :- It refers to the physical and mental effort required to do a work. For example, engineer, manager, worker, etc. The payment made to the labour in exchange of his/her services is called as wage.
3. Capital :- It refers to the monetary investments and physical and tangible investments like machinery, buildings, technology, tools, etc, which assists in production process. The payment received in exchange of these services is called interest.
4. Entrepreneur :- It refers to the individual who undertakes the risk to organise the production process. Entrepreneurs are the risk takers and often are the innovators of new techniques. They receive profit in exchange of their entrepreneurship.
The remunerations paid to the factors of productions are called factor payments or factor incomes. These are the aggregation of rent, wage, interest and profit.
APPEARS IN
RELATED QUESTIONS
Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.
Answer the following question.
Give any two examples of the flow concept.
Which one of the following services are included in the Secondary Sector?
Read the below case and answer the question that follow:
Circular Income Flow in a Two Sector Economy: In the figure given we can see that upper loop shows the resources such as land, capital and entrepreneurial ability flow from households to firms in the direction shown by the arrow direction.
The money flows from firms to the households as factor payments in the form of wages, rent, interest and profits, shown by the arrow direction.
The lower part of the figure shows the flow of money from households to firms in the form of consumption expenditure done by the households to purchase the goods and services produced by the firms, making the flow of goods and services from firms to households.
Thus, we see that money flows from business firms to households as factor payments and then it flows from households to firms. Thus, there is, in fact, a circular flow of money or income. This is how the economy functions.
Money Flows from ______ to ______ as factor payments.
Read the below case and answer the question that follow:
Circular Income Flow in a Two Sector Economy: In the figure given we can see that upper loop shows the resources such as land, capital and entrepreneurial ability flow from households to firms in the direction shown by the arrow direction.
The money flows from firms to the households as factor payments in the form of wages, rent, interest and profits, shown by the arrow direction.
The lower part of the figure shows the flow of money from households to firms in the form of consumption expenditure done by the households to purchase the goods and services produced by the firms, making the flow of goods and services from firms to households.
Thus, we see that money flows from business firms to households as factor payments and then it flows from households to firms. Thus, there is, in fact, a circular flow of money or income. This is how the economy functions.
Circular flow of income refers to the flow of activities of production, income generation and expenditure involving different ______ of the economy.
Read the below case and answer the question that follow:
Circular Income Flow in a Two Sector Economy: In the figure given we can see that upper loop shows the resources such as land, capital and entrepreneurial ability flow from households to firms in the direction shown by the arrow direction.
The money flows from firms to the households as factor payments in the form of wages, rent, interest and profits, shown by the arrow direction.
The lower part of the figure shows the flow of money from households to firms in the form of consumption expenditure done by the households to purchase the goods and services produced by the firms, making the flow of goods and services from firms to households.
Thus, we see that money flows from business firms to households as factor payments and then it flows from households to firms. Thus, there is, in fact, a circular flow of money or income. This is how the economy functions.
Which of the following is not the significance of Circular Flow of Income?
Read the below case and answer the question that follow:
Circular Income Flow in a Two Sector Economy: In the figure given we can see that upper loop shows the resources such as land, capital and entrepreneurial ability flow from households to firms in the direction shown by the arrow direction.
The money flows from firms to the households as factor payments in the form of wages, rent, interest and profits, shown by the arrow direction.
The lower part of the figure shows the flow of money from households to firms in the form of consumption expenditure done by the households to purchase the goods and services produced by the firms, making the flow of goods and services from firms to households.
Thus, we see that money flows from business firms to households as factor payments and then it flows from households to firms. Thus, there is, in fact, a circular flow of money or income. This is how the economy functions.
Which of the following is not an assumption of a two sector model of Circular Flow of Income?
Which of the following is a flow?
Identify the correctly matched pair of the items in Column A to those in Column B:
| Column A | Column B |
| 1. Money Flow | (a) Depreciation |
| 2. Real Flow | (b) Factor Services |
| 3. Trade Flow | (c) House Work by Housewife |
| 4. Capital Flow | (d) Inventory |
Giving valid reasons, explain how the following would be treated while estimating National income:
- Payment of indirect taxes by a firm.
- Purchase of goods by foreign tourists.
Giving valid reasons, explain how the following would be treated while estimating domestic income?
- Payment made by a Japanese tourist for goods purchased in India.
- Broker's commission on the sale of second hand goods.
On the basis of the figure given below, identify the type of flow indicated by B and D:
