Chapter 1 Lesson 3 Using Economic Models Essential
- Slides: 20
Chapter 1 : Lesson 3 Using Economic Models
Essential Question • How do businesses and individuals participate in both the product market (household sector) and the factor market (business sector) in an economy?
Vocabulary Term • Specialization – dividing up production so that Goods are produced efficiently Hardee’s makes hamburgers, not shoes!! Nike makes shoes, not hamburgers
Vocabulary Term • Division of Labor – different people perform different jobs to achieve greater efficiency (assembly line). You do your job, and I will do my Job and we will be more EFFICIENT
In our economic system there are two sectors the business sector and the household sector
Household Sector • Demand consumer goods, like: cars, computers, washers, lawnmowers, etc. • Households provide labor resources to business and own most of the resources of production
Businesses Sector • Produce and supply goods and services • Businesses demand resources for production: land, labor, capital, and entrepreneurs
These two sectors interact in two markets: the Product Market and the Factor Market
Product Markets • are the markets where households acquire finished (consumer) goods & services. • The markets we are most familiar with are retail markets. • Examples include: Wal-Mart, gas stations, Burger King, Best Buy, the dentist.
Factor Markets • are the markets where business acquire the factors of production (land, labor, capital. . ) • When you are looking for a job you are in the factor (labor) market. • Examples include: Cowan Equipment, IBM Business Solutions, Snelling Personnel
Draw The Circular Flow Model Economic model illustrating the flow of goods and services though the economy.
Product Markets Businesses produce goods and provide services in the product market. In exchange households pay for goods & services with consumption expenditures (money) Factor Markets
Product Markets Households provide labor, own land, invest in capital and have the talent businesses need to produce goods and services. To pay for these resources business pay wages and salaries, pay rent, purchase raw material, pay dividends to households. Factor Markets
Product Markets goods & services… …. goods & services …. consumption spending…. …. salaries, wages, rent, dividends…. . land, labor, capital…… Factor Markets …entrepreneurial ability
Product Markets goods & services… …. goods & services …. consumption spending…. In a mixed economy its not always this simple, something is missing. The Government …. salaries, wages, rent, dividends…. . land, labor, capital…… Factor Markets …entrepreneurial ability
Product Markets goods & services… …. goods & services …. consumption spending…. …. salaries, wages, rent, dividends…. . land, labor, capital…… Factor Markets …entrepreneurial ability
Product Markets goods & services… …. goods & services …. consumption spending…. Personal Income Taxes Corporate Income Taxes …. salaries, wages, rent, dividends…. . land, labor, capital…… Factor Markets …entrepreneurial ability
Product Markets goods & services… …. goods & services …. consumption spending…. Personal Income Taxes transfer payments subsidies Corporate Income Taxes …. salaries, wages, rent, dividends…. . land, labor, capital…… Factor Markets …entrepreneurial ability
Product Markets goods & services… …. goods & services …. consumption spending…. Personal Income Taxes transfer payments subsidies Corporate Income Taxes …. salaries, wages, rent, dividends…. . land, labor, capital…… Factor Markets …entrepreneurial ability
Review Question: Chapter 1 : Lesson 3 Read pages 21 -29 and answer Review Questions on page 29. Hand in Google Class Room.