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Understanding the Interactions Between Factor and Product Markets in Economic Flow

This activity explores the relationship between the factor market and product market by analyzing how prices and quantities of inputs influence production and consumer behavior. It illustrates the circular flow of the economy, detailing roles of households and businesses in both markets. Participants will fill out a table to identify supply and demand roles and types of payments like wages, rent, and product prices based on given scenarios. This understanding aids in grasping how changes in one market can trigger effects in the other.

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Understanding the Interactions Between Factor and Product Markets in Economic Flow

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Presentation Transcript

  1. Activity 43 the factor market Determining the prices and quantities of inputs necessary for production

  2. The product market Money payments Consumer Purchases Goods & Services HOUSEHOLDSRESOURCE OWNERS Business firms Productive Resources L. L. C. E. Income payments Wages, Rent, Interest, Profits The factor market

  3. Consider the circular flow of the economy, and fill in the table by determining whether the activity takes place in the product or factor market what the role of the participant is in terms of supply and demand whether the price is a product price, a wage, interest or rent

  4. Consider the circular flow of the economy, and fill in the table by determining whether the activity takes place in the product or factor market what the role of the participant is in terms of supply and demand whether the price is a product price, a wage, interest or rent

  5. The product market Money payments Consumer Purchases Goods & Services HOUSEHOLDSRESOURCE OWNERS Business firms Productive Resources L. L. C. E. Income payments Wages, Rent, Interest, Profits The factor market

  6. If input costs change in the factor market – price and output will be affected in the products market If price changes in the products market, because of a change in demand – the factor market will be affected The circular flow also shows the interconnectedness of the two markets

  7. Consider the following headline; and determine which market (product or factor) is affected first, then determine how the other market is affected“A study announces increased cancer risk from drinking coffee”

  8. Consider the following headline; and determine which market (product or factor) is affected first, then determine how the other market is affected“A study announces increased cancer risk from drinking coffee”

  9. Consider the following headline; and determine which market (product or factor) is affected first, then determine how the other market is affected“There is an increase in the number of people looking for work”

  10. Consider the following headline; and determine which market (product or factor) is affected first, then determine how the other market is affected“There is an increase in the number of people looking for work”

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