Factor Market

Factor market

Factor market in the economy is a market in which companies can buy the production factors, for the production of the relevant needed goods.

In addition to the factors of production such as labor, land and capital there also takes place a trade in raw materials, for example. Of course, production factors at a factoring market can not only be bought but also sold. On the factoring market, therefore, the factors which are necessary for production are concerned. Moreover, is partially assured a trade instead of property rights on the factor market. The opposite of the factoring market is the goods market. This is because finished goods are already being sold on the goods market.

Typical Factor Markets

The most prominent factor market is the labor market. Simplerly said, workers are offered and asked for appropriate payment. Because labor (whether qualified or not) is needed for any type of production, the labor market is an extremely important factor market. The capital market is also an important factor market. This is also the fact that a production without capital is simply not possible. Before a product can be manufactured at the end, various financing questions have to be clarified.

And again briefly summarized:

  • One factor market is one where production factors are supplied and which are used for production of goods
  • Typical factories are the labor market, the capital market and the land market
  • Contrary to the factoring market is the goods market


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