factor cost
C2Formal, Academic, Technical
Definition
Meaning
The total cost of producing a good or service, measured in terms of the payments made to the factors of production (land, labour, capital, enterprise).
In national income accounting, it refers to the total cost of production excluding indirect taxes but including subsidies. It is the price from the producer's perspective, before taxes are added to form the market price.
Linguistics
Semantic Notes
Used primarily in economics and accounting. It is a compound noun functioning as a technical term. It contrasts with terms like 'market price' or 'consumer cost'.
Dialectal Variation
British vs American Usage
Differences
No significant difference in meaning. The concept and term are identical in both varieties.
Connotations
Purely technical and neutral in both dialects.
Frequency
Used with equal, low frequency in specialized economic contexts in both the UK and US.
Vocabulary
Collocations
Grammar
Valency Patterns
[Measure/Value] at factor costGDP at factor costThe calculation of factor costVocabulary
Synonyms
Strong
Neutral
Weak
Vocabulary
Antonyms
Usage
Context Usage
Business
Used in high-level corporate finance and strategy discussions concerning production efficiency and national accounts.
Academic
Core term in macroeconomic textbooks and papers dealing with national income accounting.
Everyday
Virtually never used in everyday conversation.
Technical
Essential term in economic statistics, government reporting (e.g., Office for National Statistics), and cost-accounting models.
Examples
By Part of Speech
adjective
British English
- The factor-cost approach provides a clearer view of industrial efficiency.
American English
- The factor-cost data was central to the economist's model.
Examples
By CEFR Level
- The report analysed the country's output measured at factor cost.
- A key difference is whether you look at market prices or factor cost.
- Subsidies are added, and indirect taxes are deducted, to convert market price valuations to a factor cost basis.
- The national income at factor cost represents the total income earned by the factors of production.
Learning
Memory Aids
Mnemonic
Think of the FACTORS of production (workers, machines, land) and what they COST the producer. It's the cost from the factory's door, before the taxman adds anything.
Conceptual Metaphor
ECONOMIC VALUE IS A LAYERED STRUCTURE (with factor cost as the base layer).
Watch out
Common Pitfalls
Translation Traps (for Russian speakers)
- Avoid translating as "фактор стоимости" which is a calque and sounds unnatural. The correct economic term is "факторная стоимость" or, in context, "стоимость по факторам производства".
Common Mistakes
- Using 'factor cost' as a verb (e.g., 'We need to factor cost the project').
- Confusing it with 'cost factor', which means an element that influences cost.
Practice
Quiz
What does 'factor cost' specifically exclude?
FAQ
Frequently Asked Questions
Very similar, but 'factor cost' is a more precise national accounting term focusing on payments to factors (land, labour, capital, entrepreneurship), while 'cost of production' can be used more broadly in business.
It is unlikely outside of discussions specifically about national economic accounts, high-level corporate cost structure analysis, or academic economics. Terms like 'production cost' or 'manufacturing cost' are more common in general business.
It allows economists to see the income actually generated by the productive process itself, stripped out of the effects of government taxation and subsidy policies, giving a purer measure of economic activity.
The most direct opposite is 'at market prices', which includes indirect taxes and excludes subsidies.