Two factors Two factors of production are used to produce wine and cheese. Wine production requires wine workers while cheese production requires cheese workers. Although each of these factors is labor, they are different types of labor since their productivities differ across industries. Consumers maximize utility Factor owners are the consumers of the goods. The factor owners have a well defined utility function defined over the two goods.
Consumers maximize utility to allocate income between the two goods.
The immobile factors model is a general equilibrium model. The income earned by the factor is used to purchase the two goods. The industries' revenue in turn is used to pay for the factor services. The prices of outputs and the factor are chosen such that supply and demand are equalized in all markets simultaneously. We will assume that aggregate demand is homothetic in this model.