Explore resource markets. Learn the resource market definition and understand a resource market vs a product market. See various resource market examples.
Resource Market Definition & Examples
Table of Contents
- What is a Resource Market?
- Types of Resources Supplied to Resource Markets
- Resource Market Examples
- Lesson Summary
Frequently Asked Questions
What is an example of a resource market?
There are several examples of resource markets. One of them is the labour unions which provide labour for corporations on certain agreed terms.
What is included in a resource market?
There are several types of resources that are included in resource markets. They include land, labor, entrepreneurship, capital, and natural resources.
What is another name for the resource market?
A resource market may also be referred to as a factor market. Economists use it to separately refer to all the resources that businesses employ to legally acquire what they need to undertake in the production of goods and services. It can also be termed the input market.
What are product and resource markets?
The formal difference between a resource market and a product market is that in a resource market, businesses purchase the resources required to create a product. In contrast, in a product market, actual goods and services that businesses have developed are sold. The key difference lies in the importance of the finished product or service.
Table of Contents
- What is a Resource Market?
- Types of Resources Supplied to Resource Markets
- Resource Market Examples
- Lesson Summary
Resource market definition formally refers to a market that furnishes companies, firms, and organizations with the factors of production in exchange for monetary benefits. Resource markets are those which provide businesses with the resources they need to provide the goods or services they offer. In this sense, these markets are more business-to-business than business-to-consumer.
A resource market may also be referred to as a factor market, which economists use to separately refer to all the resources that businesses employ to legally acquire what they need to undertake in the production of goods and services. It can also be termed the input market. Factors of production acquired in the concept or resource/factor markets include labor, capital, and land. A simplistic definition is that a resource market is a market that provides businesses with the resources they need to produce goods and services.
Households and businesses, although disparate concepts are actually connected. Households supply resources to businesses. This action occurs because although one business may supply resources to another, the business supplying those resources is owned privately by a person or a household.
Resource Market vs. Product Market
The formal difference between a resource market and a product market is that businesses purchase the resources required to create a product in a resource market. In contrast, actual goods and services that businesses have developed are sold in a product market. The key difference lies in the importance of the finished product or service. The finished product does not play a part in resource markets, while the finished product is the whole point in product markets. In resource markets, corporations purchase raw materials and labor to be used to make products, while in product markets, households perform purchases from corporations. There are several types of resources included in resource markets. They include land, labor, entrepreneurship, capital, and natural resources. Consumer products are not found in resource markets and instead appear in product markets.
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There are many types of resources supplied to resource markets. They include:
- Labor— In resource markets, the labor provided to corporations is usually rated higher than conventional labor. It is because labor markets usually contain skilled labor tailored to the needs of the corporation making the purchase. The labor is needed to produce goods and services and therefore becomes extremely important as a factor of production. An example of a labor market in resource markets would be seen in the case of heavy machinery operators. A corporation entering the labor market would desire individuals who are already versed in the operation of heavy machinery.
- Capital— Capital can be defined as human-created goods used to produce other goods. In acquiring capital for production, corporations go to capital markets to acquire these resources. Examples of capital in resource markets include vehicles, heavy machinery, office buildings, proprietary software, and manufacturing facilities. These resources are usually employed long-term to allow corporations to continually develop and present products for sale. Gas is not included as capital because it is not human-made.
- Land— The land is a naturally appearing resource for developing products. Corporations must seek and purchase or rent land to allow the development of products. Land as a resource is vital for many reasons. Firstly, the land is the physical foundation upon which other human capital resources are situated. Without land, office buildings can be built, and heavy machinery cannot be installed. Secondly, the land provides corporations with a physical address that allows for its identification and operation. Physical addresses are important for legality and accountability. Lastly, the land is vital because sometimes it is the very source of raw materials that directly become products, such as in the case of agricultural produce.
- Natural resources— Natural resources are resources for corporations found naturally on and on the earth. Such resources include oil, water, and arable soil, which are used to create products or which are already products in themselves. In many cases, natural resources make up the basis of most products and, as such, are tightly regulated by governments. In almost every case, the government must provide corporations with licenses for a particular natural resource to be exploited. Natural resources found in resource markets include mineral deposits, water springs, soil in arable areas, and trees. Trees are usually classified as timber in the context of natural resources. Factories on the land cannot be considered natural resources because they did not naturally form.
- Entrepreneurship— Entrepreneurship may be defined as the propensity of an individual or individuals to act in a creative manner, show foresight, apply intuition and display a keenness for novel opportunities. In terms of the resource market, entrepreneurship is procured in the form of individuals with ideas, such as in the cases of Think Tanks. The corporations find such individuals and provide support to allow the individual or individuals to grow their venture in exchange for such benefits as a stake in the company. Entrepreneurship also entails the combination of resources to create products, and corporations need this as they seek to grow their large ventures or develop new ones. Entrepreneurship as a resource is commonly consolidated using tools like patents and copyright.
There are several examples of resource markets in the world today. Some of them include:
- Amazon— Amazon is a prime example of a resource market as corporations can acquire certain factors of production, such as vehicles and industrial equipment. It usually specializes as a product market but has also become a resource market in recent times.
- eBay— eBay is an important resource market for entrepreneurship and land. Both of them are resources for production, but in the case of land, eBay provides a way to find people who are selling land and not the land itself.
- Labour unions— Labour unions provide the resource of labor for corporations. Labour unions are a unique form of resource market in that they provide labor and operate as monopolies in labor markets.
A simplistic definition of a resource market is a market that provides businesses with the resources they need to produce goods and services. A resource market may also be referred to as a factor market, which is used by economists to separately refer to all the resources that businesses employ to legally acquire what they need to undertake in the production of goods and services. It can also be termed the input market. Households and businesses, although disparate concepts are actually connected. Households supply resources to businesses. This process occurs because although one business may supply resources to another, the business supplying those resources is owned privately by a person or a household.
The formal difference between a resource market and a product market is that businesses purchase the resources required to create a product in a resource market. In contrast, actual goods and services that businesses have developed are sold in a product market. The key difference lies in the importance of the finished product or service. Consumer products are not found in resource markets and instead appear in product markets. Similarly, gas is not included as capital because it is not human-made. There are several types of resources included in resource markets. They include land, labor, entrepreneurship, capital, and natural resources. Factories on the land cannot be considered natural resources because they did not naturally form. There are several examples of resource markets. One of them is the labor unions that provide corporations labor on certain agreed terms.
Video Transcript
What Is a Resource Market?
A resource market is a market where a business can go and purchase resources to produce goods and services. Resource markets can be distinguished from product markets, where finished goods and services are sold to consumers, and financial markets, where financial assets are traded.
Types of Resources
Businesses often have to tap multiple resources in order to produce their goods and services. Let's look at some common resources supplied to the resource market.
- Labor: Even with today's technological advances, businesses still need living, breathing human beings to perform some tasks. Businesses find employees in the labor market, where people offer their labor in exchange for money and other forms of compensation.
- Capital: A capital asset is any human-made asset that is used to generate income by helping transform labor and other resources into goods or services. Examples include such things as factories, office buildings, machinery, tools, parts, and components.
- Land: Almost all economic activity requires some piece of dirt. Even if you have an Internet business, you are still using some real estate to conduct your business. Land also includes all the natural resources that can be found on land or in it, such as timber, water, oil, gas, coal, and precious metals.
- Entrepreneurship: Some economists include entrepreneurship as a resource separate from labor. Entrepreneurship involves the ability to take risks and the ability to combine capital, land, and labor to create a business enterprise.
Who Owns the Resources?
Households supply resources to businesses. This may seem counter-intuitive at first, but let's think this through a bit. Labor is obviously owned and supplied by individuals. However, households also own the other resources as well. The first thing popping in your mind is probably, 'You're wrong - businesses own resources, and most businesses get their resources from other businesses!' But, who owns the businesses? The answer, of course, is people (or households) own the businesses…that own the resources…that are supplied to businesses.
Lesson Summary
A resource market supplies businesses the resources they need in order to produce goods and services. Common resources include labor, capital, land, natural resources, and entrepreneurship. Resources are supplied by individuals in the household sector, which ultimately own all resources, either directly or through their ownership of businesses.
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