Question

Distribution of the national income among owners of different factors is determined by the

• A. Money income of the consumer
• B. Money prices of factors of production
• C. Money income of the consumer
• D. Contractual payments in terms of money

Answer 1

The correct option is B

Money prices of factors of production

The owners of various factors of production sell their factors at market prices; say owners of land earn rent, wages to labour, interest to capital and profit to entrepreneurs. These factor incomes constitute the national income. Hence, the distribution of the national income among owners of different factors is determined by the money prices of the factors of production.