Homework Help

Households supply factors of production to business and are paid by business for doing...

user profile pic

Mizdee | Student, Undergraduate | Valedictorian

Posted September 16, 2012 at 12:34 AM via web

dislike 1 like

Households supply factors of production to business and are paid by business for doing so.  The market where this interaction takes place is called the factor market.  Is this statement true or false?

1 Answer | Add Yours

user profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted September 16, 2012 at 12:51 AM (Answer #1)

dislike 1 like

This statement is true.  That is the correct name for this market.

This question refers to the circular flow model.  This is a model that shows how all parts of the economy are connected to one another.  In one part of the model, businesses sell goods and services to households.  This is typically called the product market.  In the other part of the model, households sell factors of production (land, labor, and capital) to businesses.  This part of the model is called the factor market since it is factors of production that are being sold.  Therefore, this statement is true.

Join to answer this question

Join a community of thousands of dedicated teachers and students.

Join eNotes