Factor Market
Plain definition
A factor market is a market where the services of factors of production — labor, land, capital, and entrepreneurship — are bought and sold.
In economics
Factor markets are the mirror image of product markets in the circular flow: households supply factors to firms, which use them to produce goods. Firms demand factors up to the point where marginal revenue product equals factor price.
Example
The labor market in a city is a factor market: employers buy labor services and workers sell them for wages; the rental market for office space is another.
Common confusion
A factor market trades inputs, not finished goods; the market for cars is a product market, while the market for autoworkers and factory space is a factor market.