GOODS MARKET AND FACTORS MARKET

Goods/product/commodity markets:

Markets used to exchange final good or service. Product markets exchange consumer goods purchased

by the household sector, capital investment goods purchased by the business sector, and goods

purchased by government and foreign sectors. A product market, however, does NOT include the

exchange of raw materials, scarce resources, factors of production, or any type of intermediate goods.

The total value of goods exchanged in product markets each year is measured by gross domestic

product. The demand side of product markets includes consumption expenditures, investment

expenditures, government purchases, and net exports. The supply side of product markets is production

of the business sector.

Factors markets:

Markets used to exchange the services of a factor of production: labor, capital, land, and

entrepreneurship. Factor markets, also termed resource markets, exchange the services of factors, NOT

the factors themselves. For example, the labor services of workers are exchanged through factor markets

NOT the actual workers. Buying and selling the actual workers are not only slavery (which is illegal) it's

also the type of exchange that would take place through product markets, not factor markets. More

realistically, capital and land are two resources and are legally exchanged through product markets. The

services of these resources, however, are exchanged through factor markets. The value of the services

exchanged through factor markets each year is measured as national income.