LESSON 16: Factor Markets vs Product Markets

What is a product market?

A product market is any market where finished goods and products are bought and sold; the marketplace can be physical or virtual.

What is a factor market?

A factor market is any place where factors of production are bought and sold; factors of production include land labor capital and entrepreneurship. Labor is sold everywhere.

What is capital in economics?

Capital includes things like technology machinery tools and equipment; it is one of the factors of production sold in factor markets.

What are the goals of each participant in the economy?

Consumers try to maximize happiness or satisfaction from goods and services; businesses try to maximize profits; government tries to maximize societal well-being; foreigners pursue the same goals as the rest.

What is the difference between supply in product markets vs factor markets?

Firms supply goods and services in the product market; individuals supply factors of production (like labor) in the factor market.

What is the difference between demand in product markets vs factor markets?

Individuals demand goods and services in the product market; firms demand factors of production (like labor and capital) in the factor market.

Are factor markets and product markets connected?

Yes the Factor market and the Product market are CLOSELY intertwined with each other; you may not be able to distinguish one from the other.