interest paid is always a factor income. do you agree? justify.
Answers
In Production Economics,the interest paid on capital or physical inputs and income earned from those can be considered as factor income.
Explanation:
In Production Economics,factor income refers to the revenue or income earned from selling the various factor/inputs of production to the firm or manufacturers to be used for production purposes.Common examples of factors/inputs of production include land,labor,capital and entrepreneurship.Now,each of these factor inputs earn a revenue or income in exchange for their contribution in the production of output by firms of business organisations.In particular,the income or periodic interest payment that are earned on renting or hiring any capital or physical factors/inputs by the firms such as machinery,equipment,technical tools,physical plant etc. are considered as factor income.Now,it must be noted that this interest payment is not the interest paid against any financial loan taken from a bank or other financial institutions or any deferred payment on credit purchase.In this case,interest payment refers to the factor income earned by the owners of capital or physical inputs for renting them to any manufacturing firm or business organisation.