which of the following is a transfer income

Step 1: Analyze the question The question asks which option is a transfer income. Transfer income (also called a transfer payment) is money received without providing any good or service in return, so it does not come from production.

Step 2: Explain the concept In economics, income is of two types:

• Earned income (factor income): payment for contributing a factor of production. • Land earns rent. • Capital earns interest. • Labour earns wages and salaries. • Entrepreneurship earns profit, and dividends are the share of profit paid to shareholders.
• Transfer income: money moved from one person or group to another, usually by government, with no current productive service given in return. Examples include pensions, unemployment benefits, scholarships, subsidies, and gifts.

Step 3: Examine each option

• A. Dividends: the reward for owning shares and investing capital in a company. This is a factor income, so it is not a transfer.
• B. Rent: the reward for supplying land or property. This is a factor income.
• C. Pensions: payments to retired workers who are no longer working. They give no current service in exchange, so this is a transfer payment.
• D. Interest: the reward for lending capital. This is a factor income.

Step 4: Answer The correct option is C. Pensions.

Tip: Ask yourself, "Is this payment for a factor of production?" If yes, it is a factor income. If no, and it is a "free" payment such as a pension, subsidy, grant, or social benefit, it is a transfer income. Remember the factor rewards as R.I.W.P: Rent, Interest, Wages, Profit.