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# Learn Financial Freedom Step by Step

Every year lots of goods and service produce in our country. For producing these goods and services, we need land, labor, entrepreneurs and capital. For paying the price of all resources of production is called factor pricing. We need to pay rent for use of land. We need to pay wage to labourers. We need to pay interest on capital. We need to pay profit to entrepreneurs.  Pricing of factors or resources of production means to determination of price of different sources of production. In simple words, we will learn how we will determine the price of labourers, land, capital and entrepreneurs.

Following are the main theory of factory pricing.

1. Marginal Productivity Theory

As per this law, we determine the price of factor on the basis of factor's marginal productivity in full competition. We demands the factors because these are able to produce the product. Ability to produce the goods and services will be productivity. So, we demand the factor because its ability of productivity. If we want to find the productivity of any factor. We will pause all the factors and only single unit of active factor, we use in productivity and we check the increase in total productivity. Increase in total productivity due to this factor, will be marginal productivity.

For example, we have used 1 unit of laborer and we produce 10 meter cloth and when we use second unit of laborer, we have produced the 20 meter cloth. So, our marginal productivity is

=20-10 = 10 units which happens due to laborer increment. So, second laborer need the wage of its productivity basis.

Quantity of laborer will = price of laborer = laborer's marginal productivity

## Ashok Kumar's Contents\$type=blogging\$show=https://www.svtuition.com/p/ashok-kumar.html\$hide=author

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Svtuition: Theory of Factor Pricing
Theory of Factor Pricing