Factor Market: Definition & Examples

Factor Market: Definition & Examples
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  • 0:03 Factor Market Defined
  • 2:10 Land
  • 2:27 Raw Materials
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Lesson Transcript
Instructor: Brianna Whiting
We all know most finished products began with a bunch of different pieces. But did you know there is an actual market for those products and services needed to complete that finished product? Learn all about that market in this lesson.

Factor Market Defined

Meet Bev! Bev works for a furniture store. Each day, her job is to design the layout of how each piece of furniture will be placed in the store. She knows she needs to make it look like an inviting place so that customers can picture each piece in their home. Part of making sure the furniture looks good is making sure she has plenty of pieces from which to choose. While this has never been a problem for Bev before, when she came into work this morning, she realized that many of the pieces of furniture still needed to be assembled. Where were all of the employees that assembled the furniture? How was she supposed to design a layout without furniture? In this lesson we'll learn about factor market, which is essentially the market for services of those things that go into production, like the labor needed to build the furniture.

So, we know that Bev needs the furniture to be built so she can do her job. Factor market would aid her in her search for labor that's skilled enough to assemble the furniture. This is because factor market is the marketplace for services that are needed for production that are purchased and sold. Some of those factors are things like labor, capital, raw materials, entrepreneurship, and land. All of these factors are needed for production so that a company can produce a finished product. For example, the factor is the service or labor that the furniture assembly employees offer and not the actual workers themselves. Their services are needed so that the furniture can be assembled and so the furniture store can sell a finished product.

It's important to point out that factor market is different from those markets that sell goods and services. In other words, the market for goods and services entails selling or marketing products that are finished. Factor market centers around the factors that are needed to get to a finished product. Without the factor market, the goods and services market could not be completed.

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