SUPPLY OF FACTORS OF PRODUCTION

A complete analysis of the determination of factor prices and of incomes must combine both the demand for inputs just described and the supplies of vary from input to input, and this topic will be explored in depth in the next two chapters. At this point we provide a few introductory comments. In a market economy, most factors of production are privately owned. People “own” their labor in the sense that they control its use; but this crucial “human capital” can today only be rented, not sold. Capital and land are generally privately owned by households and by businesses.

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