#economics #factorsofproduction #rewards
As the factors of production are productive resources, each has a reward for its
use in the production process:
The reward for land is called rent. Rental income comes from the ownership of
property, such as physical and related assets, and is paid by the tenants of the
land resources.
The reward for labour is called wages and salaries. Wages are paid to workers
on an hourly basis, such as those who earn a national minimum wage (see
Chapter 18). Salaried staff are paid a fixed amount per month.
The reward for capital is called interest. If the interest rate (see Chapter 27)
is high, it becomes less worthwhile for businesses and households to borrow
money for production purposes because the cost of borrowing is high, and vice
versa.
The reward for enterprise is called profi t. This is the return for the
entrepreneur’s good business ideas and for taking the risks in starting up and
running the organisation. Profi t is what remains after all business costs are
paid, including payment to the other factors of production.
Collectively, the four rewards for the factors of production are known as income.
How do entrepreneurs earn their reward in the production process?
What is the difference between wages and salaries as rewards for labor?
How does interest serve as a reward for capital?
What are the risks and rewards associated with entrepreneurship?
How do rent and lease payments serve as rewards for land?