13. What is a wage rate?

A wage rate is a form of periodic payment from an employerto anemployee, which may be specified in anemployment contract. It is contrasted with piecewages, where each job, hour or other unit is paid separately, rather than on a periodic basis. From the point of abusiness, wage rate can also be viewed as the cost of acquiringhuman resourcesfor runningoperations, and is then termed personnel expense.

In accounting, wage rates are recorded in payroll accounts. Every employee has different wage rate and we may say that wage rate is varied because of following factors: wage rate per industry; wage rate per locality; wage rate per state or province; wage rate per level of experience; sex; race and other factors.

The theory that uses the tools of supply and demand to explain differences in wage rates is called the traditional theory of wage determination.

14. What are the factors affecting the wage rate?

A wage rate is a form of periodic payment from an employerto anemployee, which may be specified in anemployment contract. Every employee has different wage rate. Wage rate is varied because of following factors: wage rate per industry; wage rate per state or province; wage rate per level of experience; sex; race and other factors.

The theory that uses the tools of supply and demand to explain differences in wage rates is called the traditional theory of wage determination. When the level of supply is large in relation to demand, wages generally are low. When the level of supply is low in relation to demand wages generally are high.

In most cases, the higher the level of skills, or grade of labour, the higher the average yearly wage rate. At times, wages are determined not by supply and demand but by the influence of organized labour and the collective bargaining process.

15. What is the difference between physical and financial capital?

In economics capital is one of the factors of production. It has two different forms – physical capital and financial capital.

The term physical capital applies to the stock of buildings, equipment, instruments, raw materials, semi-finished and finished goods in inventory, and other physical objects used by a firm to produce its goods or services. It is a produced factor of production, a durable input which is itself an output of the economy. Capital is unique in that, it is the result of production.

In turn financial capital can refer to money used by entrepreneursandbusinessesto buy what they need to make their products or provide their services. Financial Capital refers to the funds provided by lenders (and investors) to businesses to purchase real capital equipment for producing goods/services. Financial Capital is provided by lenders for a price:interest.

16. What is entrepreneurship?

Factors of production provide the means for a society to produce and distribute its goods and services. Entrepreneurship, the managerial or organizational skills needed by most firms to produce goods and services, is the fourth factor of production. The entrepreneur brings together the other three factors of production — land, labour and capital. Entrepreneurship means seeing opportunities and acting on them to introduce new or better goods and services to the market.

Entrepreneurs take risks by investing their time and money in innovative ideas and products knowing that they may fail in the market. Entrepreneurs try new methods of management and organization in hopes that they will be able to use scarce recourses more efficiently than their competitors. Entrepreneurs develop new ideas and technologies. When they are successful, entrepreneurs earn profits, the return or reward for the risks, innovative ideas and efforts put into the business. When they are not successful, they suffer losses.