Distribution of Income
Distribution of income involves payments to factors of production in accordance with their marginal productivity and social productivity requirements. Such payments depend upon the particular types of demand and supply configurations for factors of production. In a perfectly competitive market for factors of production it is the marginal productivity theory of factor payments that is applicable in determining factor payments. In the case of market imperfections, particularly of the type of externalities and in monopsonistic competition, the marginal productivity theory of factor payments is not totally acceptable. Here methods on the social determination of wages and remuneration must be applied.
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