Resource markets allow for the exchange of goods and services to produce products, including natural resources, labor, financial services, and capital. They play a role in the circular flow of economic transactions and help companies make decisions to increase production. The use of global resource markets can reduce operating costs but may lead to lower product quality and loss of customers.
A resource market allows parties to exchange goods or services to produce products. The most common markets include those that exchange natural resources, labor, financial services, or capital. A review of these markets generally falls under macroeconomics. Nations will review information obtained from each resource market to determine the current strength of the economy. The data collected also helps companies make decisions that will lead to increased production and the ability to meet current demand for products.
Each resource market plays a role in the circular flow of economic transactions. The resource market allows firms to produce goods that enter the product market. Households then use the final products as part of their standard of living. The resource market is then filled by individuals placing money in savings accounts at banks and individuals looking for work. This provides a flow of goods through a nation’s economy and multiple markets.
Defining each resource market by the goods in them allows for the ability to accurately track the flow of goods. Natural resources include land, timber, fish, quarries, and similar items. Not all companies use these products for production. Manufacturers harvest these resources and transform them into intermediate goods used by other companies. For example, a lumber manufacturer will harvest lumber, making the pieces of lumber used by construction companies.
Labor markets are a source of use for almost all companies. There are two groups in this resource market: skilled and unskilled. Skilled workers represent individuals with specific skills that companies will pay high prices to obtain. Accountants, engineers, actuaries, and computer technicians are some examples of skilled labor. Unskilled labor includes individuals with few technical skills; These individuals often work in jobs with repetitive tasks.
The markets for financial services and capital resources include all businesses that deal with money. These include banks, investment firms, and lenders. Businesses often need the services of these companies to produce goods and services. The use of outside capital allows a company to grow its business operations faster than expect operating profits. Growth allows for increased production and the ability to meet increased consumer demand.
The increasing use of global resource markets allows companies to use resources from international companies. This can reduce operating costs by purchasing cheaper intermediate goods or labor. Although this can lead to higher profits, the detractors of these markets include lower product quality and the potential for losing customers who do not prefer outsourced products.
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