Updated on March 16, 2023
As per economists and the general definition of factor markets, every market can either be a factor market or a final market. The factor market provides all kinds of inputs including labour, capital and land which are essential requirements in converting the inputs to final products. Factor markets also help in creating a perfect market situation where the participants can buy and sell inputs at prices as per the prevailing market forces of demand and supply.
These markets also undertake distribution of income earned through sale or product/services.
Perfect factor markets are often replaced or characterised by economic policies in a socialistic economy as compared to a capitalistic market.