Factor cost
Encyclopedia
Factor cost has the following uses in economics
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Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
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- Factor cost or national income by type of income is a measure of national income or output based on the cost of factors of productionFactors of productionIn economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...
, instead of market prices. This allows the effect of any subsidy or indirect taxIndirect taxThe term indirect tax has more than one meaning.In the colloquial sense, an indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax...
to be removed from the final measure.
- Factor cost can also refer to the unit cost of a particular factor of production (input in the production process), such as the wage rate or the rental rate of capital.