Factors of production
There are two categories of factors of production: tangible resources including capital, land and natural resources; and non-tangible resources including labor, knowledge and entrepreneurship.
In factor markets the buyer and seller pattern is opposite to the goods markets; in goods markets firms sell and households buy, but in factor markets firms buy and households sell. Households provide the labor; their savings flows into the financial markets and finances physical capital; they own the land and they are the entrepreneurs. The expenditures of the households are financed by the income they earn by selling the factors of production (Gwartney and Skipton, 2015).
Firms weigh the cost versus productivity of …show more content…
Greater skills also facilitate worker mobility across occupations and regions to venture into newer job openings, this helps in reallocation of resources to a more productive task (Heckman, 2003).
More than 135 million Americans form the workforce of the country. For any economy to function well, the performance of its labor force plays a vital role. In any market, productivity is the offspring of progress; so, any firm will progress only if their productivity is high and in order for them to have a maximum profits, workers are required be satisfied. Today’s workplace acknowledges facilities like safety, protection against occupational accidents, flexible working hours and telecommuting as a mantra for keeping the employees satisfied (Cox and Alm, FRB 2000).
In the job market, every job has its own perks and downsides, it is up to a worker to decide, what he or she is ready to trade-off. Different types of jobs are more or less attractive to prospective employees. The employers compensate more for undesirable aspects of the job and compensate less when the job has desirable aspects. Employees who want to earn more wages, take up the less desirable jobs and vice versa. Employment that is more attractive to prospective employees can pay a lower wage; employment that is less attractive to potential workers must pay a higher wage, this difference in wages based on risk, physical effort, legal