What are transfer earning?
Answers
Answer:
Transfer earning is the minimum payment required to keep a factor of production in its present use. It is an opportunity cost an individual forgoes when deciding to work in one job rather than next best alternative
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Explanation:
Transfer earnings are the minimum income a worker needs in order to supply their labour
Definition of Transfer EarningsTransfer earnings are defined as the minimum payment necessary to prevent a factor of production moving to a different use.
Example of Transfer Earnings for LabourA worker may have a transfer earning of £150 a week. If he was paid less, he wouldn’t want to work in that occupation. For example, a worker may feel he is better off claiming unemployment benefits that working for less than £150 a week.
Importance:The importance of the concept of transfer earnings lies in this that:
(a) It helps in the determination of the value of a factor of production.
(b) The supply of factor unit for a particular use depends on its transfer earnings. If it is not paid, its supply will not be forthcoming.
(c) According to the modern theory of rent, economic rent, depends on the transfer earnings of a piece of land
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