Title: Distribution: Factors of Production and their Prices
Abstract: This chapter discusses the factors of production and their prices. The study of factors of production plays a double role in economics. It helps to answer the following two questions: (1) how production is best organized and (2) for whom goods are produced. Market determination of the prices of factors of production, labor, capital and land, is analyzed in a manner closely paralleling that used for the prices of goods and services by studying the forces of supply and demand. The demand for the services of a factor of production is the schedule of quantities that businesses want to buy at varying prices during a period of time. The demand is said to be derived from the value of the goods which a factor produces. It is determined by a factor's productivity and the ease with which it may be substituted for other factors. The elasticity of demand for a factor depends on these influences, on the time allowed for a price change to take effect and on the relative importance of the factor in total costs. It is more difficult to generalize about the determinants of the supply of productive services than about the demand for them. Institutional considerations become highly relevant and it is usual to deal separately with the price of each of the main productive factors.
Publication Year: 1982
Publication Date: 1982-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
Access and Citation
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot