(i) According to Hawley profit is the reward for risk taking in business.
(ii) Every business involves some risks. Since the entrepreneur undertakes the risks, he receives profit.
(iii) If the entrepreneur does not receive the reward, he will not be prepared to undertake the risks
(iv) Thus higher the risks, the greater are the profit.
(v) Every entrepreneur produces goods in anticipation of demand.
(vi) If his anticipation of demand is correct, then there will be profit.
(vii) It is the profit that induces the entrepreneur to undertake such risks.

(i) According to Schumpeter profit is the reward for innovation.
(ii) Innovation means invention put into commercial practice.
(iii) Innovation may consist of introduction of a new product or a new method of production or opening a new market or discovery of new raw materials or reorganisation of an industry.
(iv) The cost of production decreases and so profit increases.
(v) Innovation should be done continuously.

(i) According to Clark profit is the difference between price and cost of production.
(ii) Profit is the reward for dynamic changes in society-like increase in population, increase in volume of capital, improvement in methods of production, change in forms of industrial organisation and increase in wants of consumers.

SI.No	Rent	Quasi Rent
1	Rent accrues to land	Quasi - Rent accrues to man made appliances
2	The supply of land is fixed forever.	The supply of man made appliances is fixed for a short period only.
3	It enters into price.	It does not enter into price.
4		It is temporary.

Nominal wage or money wage:
It is paid in terms of money.
Real wage:
The wages are paid in terms of goods & services
Piece wage:
The wages are paid on the basis of quantum of work done.
Time wage:
The wages are paid on the basis of the amount of time that the worker works.

Personal distribution is the distribution of National Income among the individuals.

i) Abstinence (or) Waiting theory.
ii) Agio Theory of Interest.
iii) Loanable Fund Theory.
iv) Liquidity Preference Theory.

According to the theory, wage is equal to the standard of living of the workers. Standard of living wage means the amount necessary to maintain the labourer in the standard of life.

The demand for loanable funds depend upon the following:
(i) Demand for Investment (I)
(ii) Demand for Consumption (C)
(iii) Demand for Hoarding (H)

(i) Net interest is only a part of the gross interest.
(ii) It is the payment for use of capital only.
(iii) Net interest is otherwise known as pure interest

Uncertainty theory was propounded by the American economist Frank H. Knight. To him, profit is the reward for 'uncertainty bearing'. He distinguishes between 'insurable' and 'non-insurable' risks.
Insurable Risks: Certain risks are measurable or calculable. Some of the examples of these risks are the risk of fire, theft and natural disasters.' Hence, they are insurable. Such risks are compensated by the Insurance Companies.
Non-Insurable Risks: There are some risks which are immeasurable or incalculable. The probability of their occurrence cannot be anticipated because of the presence of uncertainty in them. Some of the examples of these risks are competition, market condition, technology change and public policy. No Insurance Company can undertake these risks. Hence, they are non insurable. The term 'risks' covers the first type of events (measurables - insurable) and the term 'uncertainty' covers the second type of events (unforeseeable or incalculable or not measurable or non-insurable). According to Knight, profit does not arise on account of risk taking, because the entrepreneur can guard himself against a risk by taking a suitable insurance policy. But uncertain events cannot be guarded against that way. When an entrepreneur takes himself the burden of facing an uncertain event, he secures remuneration. That remuneration is 'profit'.

According to Keynes, the rate of interest is determined by the demand for money and the supply of money. The demand for money is liquidity preference. In fact, liquidity preference for speculative motive determines rate of interest. The supply of money is determined by the policies of the Government and the Central Bank of a country. The total supply of money consists of coins, currency notes and bank deposits (Say M = 200).

Equilibrium between Demand and Supply of Money:
The equilibrium between liquidity preference and demand for money determine the rate of interest. In short run, the supply of money is assumed to be constant  Rs.200.

LP is the liquidity preference Curve (demand curve). M₂ M₂ shows the supply curve of money to satisfy speculative motive. Both curves intersect at the point E, which is the equilibrium point. Hence, the rate of interest is 2.5. If liquidity preference increases from L_P to L₁P₁ the supply of money remains constant, & the rate of interest would increase from 01 to all. Numerical examples given above can also be used for better understanding. Total demand for money = M_t + Mp + M_s = 0.125Y + 0.125Y + (450 - 100i). Total supply of money = Rs. 200. Mt and M_p are influenced by Y. Hence for the sake of easy understanding, Ms alone can be considered Demand for money = supply of money at equilibrium point: 450 - 100i = 200; 450, - 200 = 100i; 250 = 100i; i = 250/100 = 2.5. This is equilibrium interest. In reality, interest rate is also influenced by national income and commodity sector equilibrium. However, they are not included here for making the understanding easier. Suppose LP remains constant. If the supply of money is OM₂, the interest is OI₂ and if the supply of money is reduced from OM₂ to OM₃, the interest would increase from OI₂ to OI₃, If the supply of money is increased from OM₂ to OM₄, the interest would decrease from OI₂ to OI₄,
Criticisms:
(i) This theory does not explain the existence of different interest rates prevailing in the market at the same time.
(ii) It explains interest rate only in the short-run.

The marginal product of a factor is expressed as MPP, VMP and MRP.
(1) Marginal Physical Product (MPP)
The Marginal Physical Product of a factor is the increment in the total product obtained by the employment of an additional unit of that factor.
(2) Value of Marginal Product (VMP)
The Value of Marginal Product is obtained by multiplying the Marginal Physical Product of the factor by the price of product. Symbolically
VMP = MPP x Price
(3) Marginal Revenue Product (MRP)
The Marginal Revenue Product of a factor is the increment in the total revenue which is obtained by the employment of an additional unit of that factor,
MRP = MPP x MR

Marginal Productivity Theory of Distribution: Assumptions:
This theory is based on the following assumptions:
(i) All the factors of production are homogenous.
(ii) Factors of production can be substituted for each other.
(iii) There is perfect competition both in the factor market and product market.
(iv) There is perfect mobility of factors of production.
(v) There is full employment of factors.
(vi) This theory is applicable only in the long-run.
(vii) The entrepreneurs aim at profit maximization.
(viii) There is no government intervention in fixing the price of a factor.
(ix) There is no technological change.