Factor+Payments

Factor Payments show up in the circular flow model in macroeconomics as payments made by the firms from the factor market to pay the households for their goods and services provided. Factor Payments are essentially the production cost for firms/businesses to produce their goods and services. So example would be wages is a factor payment to labour. To pay the households for the labour they put into creating the goods and services for firms. Wages (w) à  Labour Rent(r) à  Land Interest (i) à  Capital Profit (                 )  à  Enterprise FACTOR PAYMENTS: Wage, interest, rent, and profit payments for the services of scarce resources, or the factors of production (labor, capital, land, and entrepreneurship), in return for productive services. Factor payments are frequently categorized according to the services of the productive resource. Wages are paid for the services of labor, interest is the payment for the services of capital, rent is the services for land, and profit is the factor payment to entrepreneurship. In the circular flow, these are payments made by the business sector for factor services purchased from the household sector through the financial markets. http://www.amosweb.com/cgi-bin/awb_nav.pl?s=gls&c=dsp&k=factor+payments
 * Factor Payments**