Part of the Macmillan Foundations book series (PAFS)
In previous chapters much of our discussion tended to concentrate on markets in 151 goods and services. In the present chapter we extend some of the concepts we have already introduced to the analysis of factor markets. Recall that there are four factors of production, the services of which are combined by firms in order to produce an output. They are:
Factor markets are clearly of interest in themselves. It is important, for example, to understand the operation of the labour market. If the labour market fails to clear, unemployment may result. In such circumstances we need to consider what, if anything, can be done about it (see Chapter 11). An analysis of factor markets also allows us to understand how the income that a society generates is distributed amongst the groups that comprise it. In other words, such analysis will tell us why particular social groups — workers, entrepreneurs, the owners of capital and land — earn what they do. However, as we considered entrepreneurship in conjunction with the theory of the firm in Chapters 4 and 5, we shall concentrate here on the markets for capital, land and, especially, labour. We begin with an analysis of the labour market.
capital (factories, machines and so on)
land (all natural resources used in production)
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- Penn, R., M. Rose and J. Rubery (eds) Skill and Occupational Change (Oxford: Oxford University Press, 1994). Presents the findings of detailed research on the nature of job change in the UK in the 1980s.Google Scholar
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© Chris Mulhearn and Howard R. Vane 1999