Question

Differentiate between the following:
Factor payments and transfer payments​

Answer 1

Answer:

Factor incomes:

a) Factor incomes are bilateral(two sided)

b) Factor incomes are related to the factor of services or factor of production(land, labour, capital and entrepreneurship)

c) Example: Compensation of employees, rent, interest, profit.

Transfer payments:

a) Transfer payments are unilateral(one sided)

b) These are not related to any kind of work or services rendered by the owners of the factor of production

c) Example: Charity and grants.