Part II Product and Factor Markets

Part II Product and Factor Markets

This overview of product and factor markets, while written for the beginning student, will be
much more informative with an additional reading upon the completion of Parts I, II, and III

I. Introduction
    A. Part II investigates the many individual markets that exist in a market economy.
    B. Product markets and factor markets will be examined.
    C. Products include consumer goods and services and industrial goods.
    D. Factors include land, labor, capital, and enterprise.

II. Product market models

Model Characteristic	Pure Competition	Monopolistic Competition	Oligopoly	Monopoly
Number of companies	Infinite	Many	Few	One
Similarity of product	Identical	Different	Standardized or Differentiated	Not Applicable
Ease of new firm entry	Very Easy	Relatively Easy	Very Difficult	Not Possible
Control over price	None	Some	Interdependent	Substantial
Non-Price competition (Advertising)	Industrial	Substantial emphasizing product differentiation	More for Consumer than Industrial Goods	Good Will Advertising
Examples	Agriculture	Clothes	Autos and Steel	Utilities

Note: A product's characteristics determine its elasticity of demand.

III. Factor market models
   A. Factors (economic resources) are used to make
          goods and services sold in product markets.
     B. Four factor markets will be examined.

Factor	Income Received
1. Land	Rent
2. Labor	Wages
3. Capital	Interest
4. Enterprise	Profit

C. Economic concerns to be evaluated when analyzing fator markets include:

1. Amount and proportion of factors hired

2. Amount and distribution of factor income

3. Economic efficiency of different models

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