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)
“Forced from home, and all its pleasures,
Afric’s coast I left forlorn;
To increase a stranger’s treasures,
O’er the raging billows borne.
Men from England bought and sold me,
Paid my price in paltry gold;
But, though theirs they have enroll’d me,
Minds are never to be sold.”
—William Cowper (1731–1800)