Figure 13-2 Demand and Supply Shifts in a Competitive Factor
Market
13. 3 Factor Markets in Action
Once you have mastered the basic analysis of demand and supply in
Chapters 3 , 4 , and 5 , the determination of the price, quantity, and
income of a factor in a single market poses no new problems. Figure
2 shows a competitive market for a factor. In both parts of the figure,
the intersection of the demand and supply curves determines the factor’s
price and the quantity of the factor employed. The total market income
earned by the factor is given by the equilibrium price times the
equilibrium quantity.
Equilibrium factor prices and quantities are determined by the demand
for and supply of factors. In both parts of the figure, the initial
