In a market economic system, the factors of production are privately owned by households or firms (The terms 'market' & 'free market' are used interchangeably)
They make these resources available to firms who use them to produce goods/services
Firms purchase land, labor, & capital from households in factor markets
Households receive the following financial rewards for selling their factors of production. This reward is called factor income
The factor income for land → rent
The factor income for labor → wages
The factor income for capital → interest
The factor income for entrepreneurship → profit
In a market economic system, who owns the factors of production?
How do firms acquire resources such as land, labor, and capital in a market economy?
What are the factor markets, and what role do they play in the exchange of resources?
What are the financial rewards households receive for selling their factors of production?
What is the factor income for land, and how is it earned?
How do households earn factor income from labor?
What is the factor income associated with capital, and how is it obtained?
What financial reward do households receive for their role in entrepreneurship?
How does the concept of factor income contribute to understanding the distribution of wealth in a market economy?
Can you explain how factor income contributes to the incentives for households to participate in the production process?