1.3.3—Factor rewards

The reward to land is rent; the reward to labour is wages; the reward to capital is interest; the reward to enterprise is profit.

These labels describe income flows to factors, but real-world incomes can combine roles—for example, an owner-manager may receive both wages and profit. Scarcity and productivity influence reward levels.

A landlord receives rent, employees receive wages, a lender receives interest and an entrepreneur keeps profit after costs.

Profit is not simply sales revenue: it is the residual after paying other costs and may be negative.