AP®​ MICROECONOMICS
UNIT 3: Factor markets

In this section of the AP® Microeconomics course, the concepts of supply and demand to markets for factors such as labor, capital, and land. The concept of derived demand, and how a factor’s marginal product and the marginal revenue product affect the demand for the factor are analyzed. The role of factor prices in the allocation of scarce resources is considered. The labor market is analyzed, particularly labor supply and wage and employment determination and the effects of minimum wages, unions and monopsonies, are considered. Factor prices are applied to how the market determines the distribution of income and the sources of income inequality in a market economy.

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Nature and Function of Factor Markets

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The AP® Microeconomics Nature and Function of Factor Markets section covers the following topics:

• Factor demand
• Markets for land and capital
• Market for labor
• The cost-minimizing input combination​

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Factors of production

Factor market: Labor market