Factor market

In the economy, the factor market describes a market for production factors and rights of disposal over production factors, without which the production of goods would not be possible. It is the counterpart to the goods market on which the goods produced are traded.
Wichtige Beispiele für Faktormärkte sind der Arbeitsmarkt (Produktionsfaktor: Lohn) und der Capital market (Produktionsfaktor: Zins) sowie der Markt für Bodenleistungen, also für Ackerbau und Bodenschätze (Produktionsfaktor: Bodenrente).

The goods market is dependent on the factor market

Without the human production factor, goods would not be able to be produced, because human workers are also essential in the technological world of work. Even without capital and investments, the production of goods would largely stand still.

The pricing on the factor market

The prices for Factors of production auf dem Faktormarkt werden, genau wie auf dem Gütermarkt, durch supply and demand gebildet. Ist beispielsweise eine hohe Nachfrage nach Arbeit vorhanden, so steigt der zu zahlende Arbeitslohn bei konstantem Arbeitsangebot.

The interest rate goes down when the demand for capital also goes down when the supply is constant. This means that the price of factors of production rises when demand increases and decreases when demand falls.

example - The pricing for production factors is explained below using the example of “work”

Companies determine the demand for workers. Whether there is a high demand for labor depends on the total profit of the company. This in turn is calculated by subtracting the total expenditure from the total income.

When hiring additional workers, however, a company must weigh up how this will change the production price for the individual good, as well as the changes in marginal income and marginal expenditure (increase in expenditure and income that arises when purchasing an additional unit of quantity of a factor or good).

Summary

  • Market on which factors of production and rights of disposal for the production of goods are offered and demanded
  • is the counterpart to the goods market
  • the price for factors of production is determined by supply and demand
  • Examples: labor market, capital market, market for land services, market for raw materials
Was the explanation to "Factor market"Helpful? Rate now:

Weitere Erklärungen zu Mikroökonomie