Final answer:
Income earned from dividends is considered passive income because it generates earnings from financial investments without requiring the individual's active involvement or substantial effort on a regular basis.
Step-by-step explanation:
When considering which of these sources of income is a component of passive income, we need to understand that passive income typically comes from investments that generate income without continuous active involvement. In the context of a market economy such as the United States:
- Earnings from one's own business run by a proprietor would not be considered passive income because this typically requires direct involvement and active management.
- Salary earned from working at a software company is not passive income because it is a direct result of active labor.
- Income earned from dividends is considered passive income because it is generated from the ownership of stocks in a company with no active daily effort required.
- Income earned from selling a patent can be passive, depending on the nature of the sale and whether it results in ongoing royalty payments; however, a single instance sale would not fit the standard definition of passive income.
Therefore, the answer is that income earned from dividends is considered a component of passive income because it requires no substantial regular work on the part of the recipient to maintain the flow of income.