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Basis of the difference between the concept of Market price an Factor cost is?
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Basis of the difference between the concept of Market price an Factor ...
The reason for difference between market price and factor cost is indirect taxes and subsidies.
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Basis of the difference between the concept of Market price an Factor ...
Basis of the difference between the concept of Market price and Factor cost
Factors of Production
- Market Price: Market price refers to the price at which goods and services are bought and sold in the market. It is determined by the forces of demand and supply in the market.
- Factor Cost: Factor cost, on the other hand, refers to the total cost incurred by the producer in the production process. It includes the cost of raw materials, labor, rent, interest, and profit.
Difference in Calculation
- Market Price: Market price does not take into account any indirect taxes or subsidies. It is the price that consumers pay for a product or service.
- Factor Cost: Factor cost is calculated by subtracting subsidies and adding indirect taxes to the market price. It gives a more accurate representation of the actual cost of production.
Purpose and Significance
- Market Price: Market price is important for consumers as it helps them make purchasing decisions based on the prices of goods and services in the market.
- Factor Cost: Factor cost is important for producers as it helps them determine the actual cost of production and make decisions regarding pricing, cost-cutting, and profitability.
In conclusion, while market price and factor cost are both important concepts in economics, they serve different purposes and are calculated differently. Understanding the difference between the two can help businesses make informed decisions about pricing and production costs.
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Basis of the difference between the concept of Market price an Factor cost is?
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Basis of the difference between the concept of Market price an Factor cost is? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Basis of the difference between the concept of Market price an Factor cost is? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Basis of the difference between the concept of Market price an Factor cost is?.
Basis of the difference between the concept of Market price an Factor cost is? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Basis of the difference between the concept of Market price an Factor cost is? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Basis of the difference between the concept of Market price an Factor cost is?.
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