Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments...
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Transcript of Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments...
![Page 1: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/1.jpg)
Understanding the circular flow of
income
![Page 2: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/2.jpg)
HOUSEHOLDS RESOURCE OWNERS
Business firms
Money payments
Income paymentsWages, Rent, Interest, Profits
Consumer Purchases
Productive ResourcesL. L. C. E.
Goods & Services
The product market
The factor market
![Page 3: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/3.jpg)
1. Give three examples of resource owners
• 1.
• 2.
• 3.
![Page 4: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/4.jpg)
2. Define a business firm
![Page 5: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/5.jpg)
3. What is the product market?
![Page 6: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/6.jpg)
4. Give three examples of transactions you made this week in
the product market:
• 1.
• 2.
• 3.
![Page 7: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/7.jpg)
5. What is the factor market?
![Page 8: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/8.jpg)
6. Give an example of a transaction you or your family made this week
in the factor market:• 1.
• 2.
![Page 9: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/9.jpg)
7. How are business firms connected to the factor and
product markets?
![Page 10: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/10.jpg)
8. How are households connected to the factor and
product markets?
![Page 11: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/11.jpg)
9. Where do resource owners get the money to buy goods and services in the product
market?
![Page 12: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/12.jpg)
10. Where do business firms get the money to pay resource
owners for their land, labor, capital and entrepreneurship in
the factor market?
![Page 13: Understanding the circular flow of income. HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer.](https://reader036.fdocuments.us/reader036/viewer/2022082816/56649f475503460f94c69345/html5/thumbnails/13.jpg)
11. Why is it important to know that a market economy is
characterized by interdependence?
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HOUSEHOLDSSELL, LOAN, LEASE, RENTTHE FOUR FACTORS OF
PRODUCTIONTO BUSINESS FIRMS
HOUSEHOLDS receive income from selling productive resources
to firms, which allows them to purchase final goods and services
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Business firms sell finished goods to households
BUSINESS FIRMS earn income from selling products to households, which allows them to
purchase productive resources
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12. What determines the prices of land, labor, capital and
entrepreneurship in a factor market?