Meaning of
factor pricing
Factors of production are
traditionally classified as Land, Labor, Capital and entrepreneurship. All
these factors of production jointly produce the output or goods and services.
The prices of Land, Labor, Capital and entrepreneurship or organization are
paid in terms of rent, wages, interest and profit respectively.
Hence, theory of factor pricing
deals how rent, wages, interest and profit are determined indifferent kinds of
markets.
2. Wages
2.1. Meaning of Wages
In economics, mental and physical
work is defined as labor. Wage is the reward paid to the worker for his labor.
Wages may be received in kinds, in services and in money.
According to the nature of work,
wages may be disbursed in different periods like a day, a week, a month, a year
etc. Sometimes, wages are disbursed on the basis of a certain piece of work in
this condition, no period is fixed, a person may also get wages in the form of
salary, free, allowance, income etc.
The wages received from different
sources are divided into two pasts (i) Money wages (nominal wages) (ii) Real
wages.
2.1. (A) Money
Wages
Money wages (nominal wage) is the
wage, which is expressed in terms of money. Not any extra benefit but amount of
money is included in this type of wage. For an example, if a person works I n a
company and he receives 15,000/- per month salary as his wage, this is his
money wage.
2.1. (B) Real
wage
Real wage refers to all other extra
benefit along with money wage. Here, extra benefit is in terms of any
advantages, concessions, and facilities provided to the laborers by the
employers. For an example, if an insurance company provides free medical
services, free life insurance facility up to certain amount and free
residential facility for its labor along with money wage, this type of wage is
called real wage.
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