Factor markets are the platforms where factors of production, such as labor, capital, and land, are bought and sold. These markets enable businesses to acquire the resources they need to produce goods and services. For example, companies hire workers in the labor market and purchase machinery in the capital market. In factor markets, the prices of these resources are determined by supply and demand. When there is high demand for a specific skill set, wages in the labor market may increase. Similarly, if there is a surplus of capital available, the cost of borrowing may decrease, influencing business investment decisions.