8 Most VSAQ’s of Theories of Distribution Chapter in Inter 1st Year Economics (TS/AP)

2 Marks

VSAQ-1 : What is contract rent? (OR) Contract rent

Contract rent, also known as gross rent, encompasses various components, including economic rent, wages for management, depreciation expenses, maintenance costs, and a profit margin as compensation for the risk taken by the property owner or landlord.

VSAQ-2 : What is economic rent? (OR) Economic rent

Economic rent, in economics, signifies the surplus income derived from the ownership of land and other natural resources, which surpasses the cost of production. It is calculated by deducting interest, depreciation, wages, and compensation for risk from the gross rent or total rent received. Economic rent essentially represents the income generated by owning and controlling a resource that is in limited supply and in demand by others.

VSAQ-3 : What are real wages? (OR) What is the meaning of ‘Real Wages’? (OR) Real Wages.

Real wages signify the actual purchasing power of a worker’s income, considering changes in the price level. When a worker’s wages enable them to purchase more goods and services, their real wages are deemed high. Conversely, if inflation or rising prices diminish the purchasing power of their income, their real wages decline. Real wages serve as a crucial indicator of a worker’s standard of living because they reflect the quantity of real goods and services a worker can afford with their income.

VSAQ-4 : What is gross interest?

Gross interest refers to the total interest earned or received on an investment or loan before any deductions or expenses are subtracted. It represents the complete interest amount, inclusive of compensation for factors such as management, risk-taking, and inconvenience, without considering deductions like taxes or fees. In contrast, net interest is the interest earned after these deductions have been accounted for. Gross interest serves as the initial figure in calculating net interest.

VSAQ-5 : What is net interest? (OR) Net interest.

Net interest denotes the interest amount that remains with the lender or investor after subtracting various expenses or deductions, which may include compensation for inconveniences, risk-taking, and management, from the gross interest earned or received. It represents the actual interest income that the lender or investor will retain after considering all relevant costs and factors. Net interest is the ultimate income derived from interest-bearing investments or loans once all deductions have been factored in.

VSAQ-6 : What is gross profit?

Gross profit is the gap between total revenue and production costs.

VSAQ-7 : What is net profit? (OR) Net profit.

Net profit is the reward for entrepreneurial skills and is calculated as Gross profit minus Implicit Costs.

VSAQ-8 : What are money wages?

Money wages, also referred to as nominal wages, are wages expressed in monetary terms, such as dollars, euros, or any other currency.