Pricing of the factors of production refers to the system of making payments or rewarding the factors of production.


  1. The price for land is
  2. The price for labour is wages and salaries.
  3. The price for capital is interest.
  4. The price for entrepreneurship is


Wages are the payments which are made for the productive services of a labour.


  1. Money wages refers to the wages paid and recorded interms of money. It includes monetary payment only.

Money wages are wages earnings that are measured or expressed interm of money or nominal or money wages refers to the actual sum of money earned by the workers.

  1. Kind wages refers to the wages which are paid in the form of some goods e.g. a former pays in grams of crops to the labour, potter, carpenter etc for the services rendered by them
  2. Real wages.

Real wages means the purchasing power of money wage interms of goods and services consumed by the wage earner plus other facilities provided by the employer free of cost e.g. free uniform for policemen, transport allowances etc.


  1. Money wages and purchasing power of money while competing real wages, we have to find out what quality of goods and services can be purchased with the money wages paid to the labour.
  2. Extra income. If a labour can earn extra income from an association with a particular job, that should also be considered while counting real wages.

A teacher can earn extra income through tuition or writing a book, A doctor can earn extra income by giving consultancy to the patients at his house.

  1. Extra facilities.

Facilities such as housing, medical, education, e.t.c given to the labour should also include in real wages.

  1. Working hours.While computing real wages working hours with their distribution, leaves and vocation should be taken into consideration.
  2. Nature of work. If the work is risky, dull or injurious to health.The real wages in that case will be considered low.
  3. Working condition. Working conditions have large effect on real wages. Real wages are very much affected by behavior of the employer or environment of the working place provision for cold water and fans in the summer’s heater in the winter.
  4. Permanency of the work.

Real wages will be more in the profession where work is regular and permanent in comparison to the jobs with temporary nature.

  1. Time and cost of training.

Some workers require a long period of time and high cost for training e.g. engineering, medical and other case will be low because of time and cost of training.


Wages differs among different people in the same job and among different jobs. We find that there is a difference in the wages of workers working in different occupations. Wage differentials can be explained mainly on the following grounds;-

  1. Agreeable of the job. Some jobs are more pleasant and agreeable than others. Supply of labour in pleasant job will be more than in unpleasant jobs hence wages may have to be raised to attract workers into less attractive jobs.
  2. Regularity of the job. Some jobs provide regular employment while other give only irregular employment especially seasonal occupations such as sugar mill, ice factory, etc. hence the wages rate in the job having regular employment.
  3. Risk and danger. Some jobs are more risky and dangerous than the others. For instance;-Air services, military mires are some such examples where risk and danger are great. Hence it must be compensated by giving more wages in such occupation.
  4. Responsibility in the job. Wages sometimes differ on account of responsibility of the job eg there is more responsibility on the principal of college than the teachers that is why a college principle receives higher salary.
  5. Working hours. Sometimes the hours of work are requiring very easily or very late attendance or shifts hence higher wages have to be paid in such occupation.
  6. Cost and time of training. Jobs which require high quality training, wages will be higher in them.e.g; wages of doctors and engineers are always high.
  7. Differences in ability. Labors who are more able and efficient will get higher wages.
  8. Social prestige. Wages will also be high in the jobs having social prestige. Sometimes the wage rate is kept high merely to keep the high prestige of a particular job.
  9. Non- competing groups.

There are different categories of labour which modern economics call non- competing groups in the market e.g.; plumbers cannot complete for the job of being a doctor or a butcher cannot be employed for the job of accountancy. Thus different wages are paid for different categories of labour.

  1. Use of modern machines and techniques. Occupations having modern machines and uses high sophisticated techniques of production can provide higher wages.
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Pricing of the factors of production refers to the system of making payments or rewarding the factors of production. REWARDS FOR FACTORS OF PRODUCTION The price for land is The price for labour is wages and salaries. The price for capital is interest. The price for entrepreneurship is WAGES Wages are the...