Factor Markets Law and Legal Definition

Factor Markets are markets used to exchange the services of a factor of production: labor, capital, land, and entrepreneurship. Factor markets, also termed resource markets, exchange the services of factors, not the factors themselves. For example, the labor services of workers are exchanged through factor markets not the actual workers. Buying and selling the actual workers is not only slavery, it is also the type of exchange that would take place through product markets, not factor markets. More realistically, capital and land are two resources that can be legally exchanged through product markets. The services of these resources, however, are exchanged through factor markets. The value of the services exchanged through factor markets each year is measured as national income.