Factor Markets
All 7 Factor Markets terms in the AP Economics glossary — each with a clear, exam-accurate definition. Tap any term for the full explanation, formula, and related interactive graph.
Derived demand is the demand for a factor of production that results from the demand for the goods and services it helps produce.
Economic rent is the payment to a factor of production above the minimum necessary to keep it in its current use.
A factor market is a market where firms buy the factors of production (land, labor, capital, entrepreneurship) from households.
Marginal Resource Cost (MRC) is the additional cost a firm incurs by employing one more unit of a factor of production.
Marginal Revenue Product (MRP) is the additional revenue a firm earns by employing one more unit of a factor of production.
A monopsony is a market structure with a single buyer and many sellers, giving the buyer market power.
The marginal productivity theory of distribution says each factor of production is paid the value of its marginal contribution to output, so firms hire each input until MRP equals its price.