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Factor Market

Definition

A factor market refers to the market where factors of production, such as labor, capital, and land, are bought and sold.

Analogy

Think of a factor market like a shopping mall for businesses. Just like how individuals go to a mall to buy goods and services, businesses go to a factor market to buy the resources they need for production.

Related terms

Factor Supply: Factor supply refers to the quantity of factors of production that producers are willing and able to sell at different prices.

Labor Supply: Labor supply specifically focuses on the quantity of labor that workers are willing and able to offer at different wage rates.

Capital Market: The capital market is another type of factor market where financial resources (such as loans or investments) are bought and sold for business purposes.