Factor markets in conditions of economic competition

The modern competitive market is diverse and contains both institutionalized factors and factors whose actions do not fit into the schemes and descriptions of its functioning. First of all, it should be noted that the markets for factors of production are those elements of economic activity in which capital objects, intellectual potential, knowledge, land and minerals, entrepreneurial art are the main objects of operations-in short, a very wide range of substances directly or indirectly influencing On economic activity. A special role is played by commodity markets , where primary resources are used as such products, such as labor, capital and land. Factor markets have a number of characteristic properties that significantly differentiate them from other types of markets. First of all, it is necessary to realize that the factors of production, which are directly or indirectly used in the production sphere, are classified into two conditional categories:

- material factors to which land and capital should be attributed;

- non-material, or social factors, based on human labor (with all the components of this complex structure) and entrepreneurial art.

Competitive markets of factors of production in modern conditions contribute to the realization of a number of functions, thanks to which both the resource support of the functioning entities and the non-material one are realized. In addition, the markets for production factors contribute to solving the problems of efficient distribution and use of the natural resources, ensure rational logistics of economic ties, and contribute to the formation of an adequate market environment.

As a rule, the markets for factors of production are characterized by the presence on them of a sufficiently large number of participants who can not directly influence the price of the factors of production present in the market. In particular, if a firm decides to purchase some of the total market volume of building materials for its needs, then the firm's decision to purchase will not have any effect on the cost of these materials. Accordingly, and vice versa, if a producer of construction materials, controlling only a small part of the market, starts selling a new batch of its products, it will not significantly affect the average market price index.

To understand why these markets have such a feature, it is necessary to analyze the competitive conditions, that is, the supply and demand for a particular production factor that is present on the market. Then these figures should be added up and carried out the same operation with respect to supply in the market. As a result of this analysis, a snapshot of the demand and supply curves is obtained, which fairly transparently characterizes the situation at the moment.

Curves of demand and supply curves, characterizing the state of the market of factors, can differ significantly from those that characterize the consumer market. The reason for this phenomenon is that the demand for factors, in contrast to the demand for consumer goods, always appears as a derivative of the total volume of production of the company-participant in the market of factors and its costs for the factors used.

But there may be a situation in which these indicators will look similar. But this does not mean that, the market of factors is acquiring the properties of the consumer market. The reason for this may be a change in the general market situation on the macro-level, which affects this local market, or if it itself is a part (branch) of a larger market structure.