In the circular flow of economic​ activity, there are two kinds of markets in which firms and households interact. In the factor​ market:

Factor market is the market where companies purchase the factors of production and resources that they utilise to produce goods and services. They buy the productive resources to make payments at factor prices. Factor maker is also called input market. It is different from product market in which the households are buyers and businesses are sellers. The factor market is opposite of this.