Circular Flow of a Market Economy Have Notebooks

Circular Flow of a Market Economy Have Notebooks out Warm up: Why are entrepreneurs needed in the economy?

What does an economy look like? Chapter 2 Section Main Menu

Circular Flow of a Market Economy • In a free market economy, households and business firms use markets to exchange money and products. –Households own the Factors of Production (land, labor and capital) and consume goods and services Circular Flow Diagram of a Market Economy monetary flow physical flow Households – Firms produce goods by taking inputs (FOP) and turning them into outputs (finished products) Chapter 2 Section Firms physical flow monetary flow Main Menu

Circular Flow of a Market Economy Circular Flow Diagram of a Market Economy Product Market = the exchange of finished products (G/S) for money Households pay firms for goods and services. Product market monetary flow physical flow Firms supply households with goods and services. Households Factor Market = the exchange of Factors of Production (FOP) for money Firms Households supply firms with land, labor, and capital. Firms pay households for land, labor, and capital. physical flow monetary flow Factor (Resource) market Chapter 2 Section Main Menu

Circular Flow of a Market Economy • Product Market –Firms • Supply the goods and services that they produce to the households • Physical Exchange –Households • Pay the firms for goods and services that they need • Monetary Exchange Circular Flow Diagram of a Market Economy Product market Households pay firms for goods and services. monetary flow physical flow Firms supply households with goods and services. Households Firms physical flow monetary flow Chapter 2 Section Main Menu

Circular Flow of a Market Economy • Factor (Resource) Market Circular Flow Diagram of a Market Economy monetary flow –Households physical flow • Supply the labor (workers) to firms as well as land (resources) and capital (investors) Households • Physical exchange Firms Households supply firms with land, labor, and capital. –Firms • Pay households for labor (salaries) and land as well as paying back investors (profits) Chapter • 2 Monetary Section exchange Firms pay households for land, labor, and capital. physical flow monetary flow Factor (Resource) Market Main Menu

Circular Flow Model Review (Worksheet) <<<<<<Business Provide G/S (Products) Households Pay for G/S (Products) >>>>>> <<<<<<<Business Pay for FOP (Resources) Households Provide FOP (Resources)>>>>>> Chapter 2 Section Main Menu

Circular Flow Model Review (Worksheet) A. Taco Bell just hired you to assemble tacos MARKET ____ FLOW _____ B. You receive your first paycheck ($68. 24) _____ C. You order two tickets online for a concert _____ D. Your tickets arrive by mail _____ E. In which market are households buyers? _____ F. In which market are households sellers? _____ G. In which market are businesses buyers? _____ H. In which market are businesses sellers? _____ Chapter 2 Section Main Menu

Circular Flow Model Review (Worksheet) <<<<<<Business Provide G/S (Products) Households Pay for G/S (Products) >>>>>> <<<<<<<Business Pay for FOP (Resources) Households Provide FOP (Resources)>>>>>> Taco Bell just hired you to assemble tacos Market: Resource (FOP) Flow: Chapter 2 Section Household provides FOP (Labor) Main Menu

Circular Flow Model Review (Worksheet) <<<<<<Business Provide G/S (Products) Households Pay for G/S (Products) >>>>>> <<<<<<<Business Pay for FOP (Resources) Households Provide FOP (Resources)>>>>>> Taco Bell gives you first paycheck ($68. 24) Market: Resource (FOP) Flow: Chapter 2 Section Business Pay for FOP (Resources) Main Menu

Circular Flow Model Review (Worksheet) <<<<<<Business Provide G/S (Products) Households Pay for G/S (Products) >>>>>> <<<<<<<Business Pay for FOP (Resources) Households Provide FOP (Resources)>>>>>> You buy two tickets online for a concert Market: Product Flow: Chapter 2 Section Household pays for G/S Main Menu

Circular Flow Model Review (Worksheet) <<<<<<Business Provide G/S (Products) Households Pay for G/S (Products) >>>>>> <<<<<<<Business Pay for FOP (Resources) Households Provide FOP (Resources)>>>>>> Your concert tickets arrive online Market: Product Flow: Chapter 2 Section Business Provide for G/S Main Menu

Circular Flow Model Review (Worksheet) <<<<<<Business Provide G/S (Products) Households Pay for G/S (Products) >>>>>> <<<<<<<Business Pay for FOP (Resources) Households Provide FOP (Resources)>>>>>> In which market are households buyers? Product Chapter 2 Section Main Menu

Circular Flow Model Review (Worksheet) <<<<<<Business Provide G/S (Products) Households Pay for G/S (Products) >>>>>> <<<<<<<Business Pay for FOP (Resources) Households Provide FOP (Resources)>>>>>> In which market are households sellers? Resource (FOP) Chapter 2 Section Main Menu

Circular Flow Model Review (Worksheet) <<<<<<Business Provide G/S (Products) Households Pay for G/S (Products) >>>>>> <<<<<<<Business Pay for FOP (Resources) Households Provide FOP (Resources)>>>>>> In which market are businesses buyers? Resource Chapter 2 Section Main Menu

Circular Flow Model Review (Worksheet) <<<<<<Business Provide G/S (Products) Households Pay for G/S (Products) >>>>>> <<<<<<<Business Pay for FOP (Resources) Households Provide FOP (Resources)>>>>>> In which market are businesses sellers? Product Chapter 2 Section Main Menu

Chapter 2 Section Main Menu