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4 marksThe Demand for and Supply of Factors

CAPE Economics Unit 1 · 2007 · Paper 2 · Question 6(d)(ii)

John runs a small business with 2005 revenues of 980,000. He paid 49,000 for rent to the landlord, 147,000 in interest to the bank, and kept 196,000 after paying his staff.

Name the economic reward accruing to each factor of production.

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Other parts of this question

  1. 6(a)Define the term 'value of the marginal product of labour'.[3 marks]
  2. 6(b)Explain the difference between the labour force and the potential labour force.[12 marks]
  3. 6(c)Distinguish between size and functional income distribution and classify these distributions.[8 marks]
  4. 6(d)(i)State the earnings received by each of the four economic factors of production.[9 marks]
  5. 6(d)(iii)Indicate the percentage of total revenue earned by each factor of production.[4 marks]
  6. 6(e)(i)Distinguish between transfer earnings and economic rent.[6 marks]
  7. 6(e)(ii)Calculate the economic rent John earns if his minimum acceptable return for his personal inputs is 15% of revenues.[4 marks]

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