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.

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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.

   E. Check out 
AP Microeconomics Review Materials!

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 factor markets include:

          1. Amount and proportion of factors hired

      2. Amount and distribution of factor income

      3. Economic efficiency of different models

      Go to 23) Pure Competition