Question

Distinguish between factor income and transfer income.

Explain two differences between factor income and transfer income.

Distinguish between factor income and transfer income with suitable examples.

Differentiate between factor income and transfer income.

Answer 1

Sr. No.	Factor Income	Transfer Income
1.	Factor income refers to income received by factors of production for rendering factor services in the production process.	Transfer income refers to income received without rendering any effective service in return.
2.	It is received for providing factor land, labour, capital, and enterprise services.	It is a unilateral (one-sided) concept.
3.	Factor income of ordinary residents of a country is included in the national income.	It is not included in national income as it does not reflect any production of goods and services.
4.	Factors of production are primary inputs, which are needed to produce goods and services.	It can be received either within the domestic territory of a country or from abroad.
5.	Examples: Rent, wages, interest, and profits.	Example: Old-age pension, scholarship, etc.