Hello Sha'Kia,
Thank you for your post. Below are the explanations, to explain the different between Factor Markets and Product Markets:
Factor Market, A market 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 (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 than can be 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.
Product Markets, A market used to exchange a 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.
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