| Question | 1. Distinguish between Factor income and Transfer income? |
| Class | Class 12 |
| Subject | Economics (Macroeconomics) |
| Category | Class 12 Economics Solutions Sandeep garg |
Q.1 Distinguish between Factor income and Transfer income?
“OR”
Difference between Factor income and Transfer income ?
Solution :-
FACTOR INCOME:-
Factor Income , refers to income received by factors of production (land, labour, capital and entrepreneur), for factor services, provided by household sector in the production process. The following are the characterstics of Factor Income : –
- It is income received by factors of production (land, labour, capital and entrepreneur) ;
- It is received for providing factor services , which are provided by household sector ;
- Services are provided by household sector in the production process.
Factor income of Normal resident is included in the NATIONAL INCOME.
For example: Rent, Interest, Wages and Profit.
TRANSFER INCOME:-
Transfer Income refers to income received by households or Government, without rendering any productive services in return of them.
It is a one sided concept. It can be received either form domestic territory or abroad.
The following are the characterstics of Transfer Income : –
- It is income received without rendering any productive services ;
- It is a one sided concept since no services are provided in return of such income ;
It is NOT included in NATIONAL INCOME.
For example: – Old Age Pension, gifts and grants, pocket money, scholarships etc….
| BASIS | FACTOR INCOME | TRANSFER INCOME |
| Meaning | It refers to the income received by factors of production for providing factor services. | It refers to the income received , without rendering any factor services in the production process. |
| Concept | It is an earning concept. | It is a receipt concept. |
| Recipient | It is received by FACTORS OF PRODUCTION. | It is received by HOUSEHOLDS OR GOVERNMENT. |
| Example | Rent, Wages, Interest and Profit. | Old age pension, scholarships, gifts and grants etc…. |
Related Questions – Sandeep Garg Macroeconomics Class 12 Solutions Basic Concepts of Macroeconomics
- Distinguish between Factor income and Transfer income.
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