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:
“It is change, continuing change, inevitable change, that is the dominant factor in society today. No sensible decision can be made any longer without taking into account not only the world as it is, but the world as it will be.... This, in turn, means that our statesmen, our businessmen, our everyman must take on a science fictional way of thinking.”
—Isaac Asimov (1920–1992)
“To me a book is a message from the gods to mankind; or, if not, should never be published at all.... A message from the gods should be delivered at once. It is damnably blasphemous to talk about the autumn season and so on. How dare the author or publisher demand a price for doing his duty, the highest and most honourable to which a man can be called?”
—Aleister Crowley (1875–1947)