Difference between Factor Payment & Transfers

Factor payment is earned money i.e  Money received by Factor of Production for their contribution in economic activity. Land involved in economic activity will receive rent as it’s Factor payment. labor will get wage as factor payment. Commission of Brokers. Profit of entrepreneurs. These are the payment for their hard-work. Factor payment is in return for Goods & service.

Where as in transfers, there is no obligation for providing Goods and service. Say scholarship, Donation, unemployment benefits.

Can you tell me whether a Bonus received by an employee is factor Payment or transfer ?

Note: While calculating National income we only consider Factor Payments, and not transfers.

Tell whether following income is Factor income or transfer ?

  1. Sale of shares
  2. Profit earned by company
  3. Service of house in which owner live
  4. Wife doing domestic work
  5. Doctor service to own family member
  6. Interest on fixed deposit received by household

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