In
economic theory
Economics () is the social science that studies the production, distribution, and consumption of goods and services.
Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...
, a factor price is the unit cost of using a
factor of production
In economics, factors of production, resources, or inputs are what is used in the production process to produce output (economics), output—that is, goods and service (economics), services. The utilized amounts of the various inputs determine the ...
, such as
labor
Labour or labor may refer to:
* Childbirth, the delivery of a baby
* Labour (human activity), or work
** Manual labour, physical work
** Wage labour, a socioeconomic relationship between a worker and an employer
** Organized labour and the labour ...
or
physical capital
Physical capital represents in economics one of the three primary factors of production. Physical capital is the apparatus used to produce a good and services. Physical capital represents the tangible man-made goods that help and support the produc ...
.
There has been much debate as to what determines factor prices.
Classical and
Marxist
Marxism is a Left-wing politics, left-wing to Far-left politics, far-left method of socioeconomic analysis that uses a Materialism, materialist interpretation of historical development, better known as historical materialism, to understand S ...
economists argue that factor prices decided the value of a product and therefore the value is
intrinsic
In science and engineering, an intrinsic property is a property of a specified subject that exists itself or within the subject. An extrinsic property is not essential or inherent to the subject that is being characterized. For example, mass ...
within the product. For this reason, the term natural price is often used instead.
Marginalist
Marginalism is a theory of economics that attempts to explain the discrepancy in the value of goods and services by reference to their secondary, or marginal, utility. It states that the reason why the price of diamonds is higher than that of wa ...
economists argue that the factor price is a function of the demand for the final product, and so they are
imputed from the finished product. The theory of imputation was first expounded by the
Austrian
Austrian may refer to:
* Austrians, someone from Austria or of Austrian descent
** Someone who is considered an Austrian citizen, see Austrian nationality law
* Austrian German dialect
* Something associated with the country Austria, for example: ...
economist
Friedrich von Wieser
Friedrich Freiherr von Wieser (; 10 July 1851 – 22 July 1926) was an early (so-called "first generation") economist of the Austrian School of economics. Born in Vienna, the son of Privy Councillor Leopold von Wieser, a high official in the war m ...
.
Production economics
Factors of production
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