Peculiarities the demand for resources

Pricing in the market factor plays an important role in the economy: it determines the amount of each person in a manufactured product, income and welfare of all members of society. The fact that the owners of the factors of production are the income, the buyers of these factors is the costs. Factor prices under perfect competition are determined by supply and demand.

Factors affecting demand, respectively, and the price of resources:

- First: the demand for factors of production and the level of prices are derived from consumer demand as labor, capital, land is needed, in the end, in order to make people needed commodities. It follows that the demand for a particular factor of production depends on the demand for goods produced by this factor. Demand for labor, capital and land - is a derived demand. For example: the demand for labor is determined by the demand of society weavers on the fabric, the demand for land for growing vegetables, depends on the demand for vegetables, ie size of demand for a particular factor is dependent on the performance of this factor in creating the product and the price of the product produced by this factor;

- Second, all factors of production economically and technologically interconnected, they cannot be used separately. Needed to produce the product, and all three factors in a certain relation to each other.

The size of the demand for each factor depends not only on the level of prices for this factor, but also on the prices of other resources. When the price of a certain factor increases, demand will fall and the demand for the other factor will increase.

For example, a higher price for labor will lead to the replacement of its machines. The possibility of mutual substitution of factors of production allows combining them in a ratio that provides the lowest production costs and highest profits.

Consequently, the demand for factors of production - the interdependent process where the volume of each of involved in the production of a resource depends on the level of prices, not only for each of them, but all the others and all connected with them the resources and factors. Market provides information on the movement of prices for each of them. Price - one of the most important conditions for change elasticity of demand for each factor of production. Demand is more elastic on the factors that, other things being equal, have a lower price. This allows for mutual substitution, to push costly factors of production, reduce production costs. High market prices cause lower demand and switching it on alternative factors of production, which have relatively low prices.

- The elasticity of demand for each particular factor of production can vary depending on:

- The level of income of the company and the demand for the products;

- Mutual substitution possibilities used in the production of resources;

- The availability of markets interchangeable and complementary inputs at affordable prices;

- The desire to innovate, etc.