Perfectly Competitive Factor Market

Definition

A perfectly competitive factor market refers to a market where firms and workers freely interact to determine the wage rate for a specific type of labor. In this market, there are many buyers (firms) and sellers (workers), and no single buyer or seller has the power to influence the wage rate.

Related terms

Equilibrium Wage: The equilibrium wage is the wage rate at which the quantity of labor supplied equals the quantity of labor demanded in a perfectly competitive factor market.

Wage-Takers: Wage-takers are individuals or firms that have no control over setting wages in a perfectly competitive factor market. They simply accept the prevailing wage rate determined by supply and demand.

Labor Supply: Labor supply refers to the total number of hours that workers are willing and able to work at different wage rates in a given period of time.