Monday, November 1, 2010

Concept of factor pricing

Concept of factor pricing
The theory of factor pricing is also called the theory of distribution.Distribution is one of the important divisions of economics.
In modern word.human wants are unlimited.So large scale production is necessary.The large scale production in turn,necessitates large amount of factors of production like land,labour,capital and organization.These factors are supplied by various persons.As for example,the land is supplied by landlords,labour by labourers,capital by capitalists and management by entrepreneurs.Since production is the result of join effort,all the factors of production,it should be distributed among them.Hence,in theory of factors pricing.We study how the production is distributed among different factors,wages and profit.In the theory of factor pricing,we study how the rent,interest,wages and profit are determined.
According to Wicksteed -"What is understood by 'distribution' as a branch of practical economy is the study of the principles on which the product of any complicated industrial process is distributed amongst those whop how in any way contributed towards securing it."
In the worlds of Nicholson - "Distribution in the economic sense refers to the division of the wealth of a nation amongst the different classes."
Likewise,according to Chapman -"The economics of distribution accounts the sharing of the wealth product by a community among the agents,or the owners of agents,which have been in active in its production."