Factor incomes

The concepts of "factors of production" and "factor incomes" are interconnected with each other, and this relationship will be reflected in this article.

Factors of production can represent the following types of resources, using which:

- organization of production of goods is carried out;

- volumes of finished products are regulated.

In other words, they are identical to economic resources, which are determined by the sources and means of production.

In turn, economic resources can be classified in the context of the following characteristics: natural, labor, capital, turnover, information and financial.

Based on the listed types of resources, it is necessary to briefly characterize each of them. For example, labor can be represented as a combination of mental and physical abilities used by people in the process of creating goods. Its main characteristics are:

- the intensity, determined by the amount of consumed labor for the accepted period of time;

- productivity, measured by the number of produced products per unit of time.

The natural resources include land, which is divided into:

- Areas where industrial premises are located;

- arable land on which various plantations and crops of cereals, melons, and the like are grown;

- deposits of minerals.

Another important natural resource is entrepreneurial ability. It can be enjoyed only by a certain number of people who perform a huge variety of functions, without which a successful effective production activity is simply impossible.

The meaning of the concept of "capital" was gradually adjusted with the constant development of the economic worldview. For example, Ricardo and Smith considered it a means of production. Other economists argued that it combines money and securities. Today, capital means everything that can bring its owner income. Based on the last definition, it is divided into real, monetary and financial. However, this factor still requires some clarification. Thus, the financial component of capital in the form of shares, bonds and bank deposits to factors of production can not be attributed, since it is not directly related to the production process.

Factor incomes include those that are derived from the use of production factors. When they are compared, the following indicators are formed.

From the use of labor we receive factor incomes - wages. Rent is represented by income that the owner regularly receives from the use of property and land. The percentage is determined by the payment from the use of borrowed (loan interest) or funds invested for a certain period by the depositor (deposit interest).

The concept of "net factor income" is used for funds received from abroad. In other words, this is the difference between the incomes that compatriots received abroad and the incomes of foreign citizens who received them on the territory of our country.

Factor incomes can be used to calculate many macroeconomic indicators of the state. Below are some examples.

In the composition of the gross national product , such factor incomes are allocated:

- wages and other compensation for time worked for citizens;

- own incomes of organizations, enterprises of institutions;

- rental income;

- Profit remaining after payment of wages and interest on the loan;

- net interest, represented by the difference in interest payments of corporations paid to others, and those obtained from other firms.