Difference between factor pricing and product pricing.
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Factor pricing is associated with the factors of production that a firm is using in its production. There are many types of factor of production like labor, capital and land. For example, a owner pays wages to the labor, rent on land acquired and interest paid on the capital borrowed. These are known as the factor pricing.
Product pricing is associated with the price of the product that a firm is charging from the public and it is a final price which includes all the costs that are incurred during the initial stage of production. There is one way of product pricing is cost plus pricing.
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Difference between factor pricing and product pricing:
- The entity of factor prising is not fundamentally different from the theory of product pricing. Both product and factor prices are basically fixed by the interplay of demand and supply forces.
- In the case of factor pricing, demand and supply forces refer to demand and provide factors production.
- As in the case of product pricing, the basic function of the entity of factor prising is to explain the determinants of the cost of the factor.
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