In economic theory, the price of a finished item affects the factors of production, the various costs and incentives of producing it, so as to 'attract' it toward a theoretical Factor price. Simply put, factor price is why the price of an item tends to approach the cost of producing it.
There has been much debate as to what determines factor prices. Classical and Marxist economists argued that factor prices decided the value of a product and therefore the value was intrinsic within the product. For this reason, the term 'natural price' is often used instead.
Marginalist 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 economist Friedrich von Wieser.
Famous quotes containing the words factor and/or price:
“Children of the middle years do not do their learning unaffected by attendant feelings of interest, boredom, success, failure, chagrin, joy, humiliation, pleasure, distress and delight. They are whole children responding in a total way, and what they feel is a constant factor that can be constructive or destructive in any learning situation.”
—Dorothy H. Cohen (20th century)
“They give us a pair of cloth shorts twice a year for all our clothing. When we work in the sugar mills and catch our finger in the millstone, they cut off our hand; when we try to run away, they cut off our leg: both things have happened to me. It is at this price that you eat sugar in Europe.”
—Voltaire [François Marie Arouet] (1694–1778)