what is the difference between factor cost and market prices ? (please provide me some practical knowledge so I can understand topic deeply )
↵Factor cost refers to the cost of factor inputs such as land, labour, capital, entrepreneur involved in the production of goods and services in the form of rent, wages, interest and profits.
Market price, on the other hand refers to the price at which the goods are sold in the market. This is due to the reason that to sell goods in the market, the firm must incur some taxes or subsidies as determined by the government.
Factor Cost + Taxes Charged by the Government - Subsidy = Market Price
Hence to determine market price from factor cost, net indirect direct taxes are added and vice-versa.
Market price, on the other hand refers to the price at which the goods are sold in the market. This is due to the reason that to sell goods in the market, the firm must incur some taxes or subsidies as determined by the government.
Factor Cost + Taxes Charged by the Government - Subsidy = Market Price
Hence to determine market price from factor cost, net indirect direct taxes are added and vice-versa.