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Theories of Factor Price (Distribution) Essay

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Below is an essay on "Theories of Factor Price (Distribution)" from Anti Essays, your source for research papers, essays, and term paper examples.


Contents
1- Term factor price Definition 2
1.1 Personal Distribution 2
1.2 Functional Distribution 2
Macro theory of distribution 2
Micro theory of distribution 3
2- The Determinants of Factor Prices 4
RENT 5
Meaning of rent 5
Scarcity Rent 5
Quasi-rent 5
Theories of rent 5
WAGE 7
Concept of Wages 7
DISTINCTION BETWEEN REAL WAGES AND NOMINAL WAGES 7
Theories which explain determination of wages 8
Reasons behind variation of wages 8
INTEREST RATE 8
How interest rate is fixed? 8
This determined as any market by the supply and demand of money 8
Theory of Interest 9
PROFIT 10
Characteristics which distinguish profit from the other factor income 10
Conclusion 11
References 13

Theories of factor price (Distribution)
  1. Term factor price Definition
Price factor is the price paid for and received by the services of factor of productions (labor, capital, land, and entrepreneurship) when exchange through factor markets. Like prices in other markets, factor price adjusts to balance the forces of demand and supply. For factor demand and the factor demand curve, the factor price is negatively related to the quantity of factor services demanded. For factor supply and the factor supply curve, factor price is positively related to the quantity of factor services supplied. (1)
The key factor prices are wage rates, interest rates, rents, and profits. The rigidity or inflexibility of factor prices is an important aspect of the macroeconomic study of the short-run aggregate market.
Theories of factor pricing suggest the ways to distribute the income among the factors of production. The process of income distribution can be done in two ways. They are: personal distribution and functional distribution.
      1.1 Personal Distribution
Personal distribution of national income means the distribution of national income among various individuals in a society. It shows how inequalities of income emerge in the country.
      1.2 Functional Distribution
The...

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