Question

Distinguish between factor income and transfer receipt.

Answer 1

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.