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Circular Flow of a Market Economy

Circular Flow of a Market Economy. Have Notebooks out Warm up: Why are entrepreneurs needed in the economy?. What does an economy look like?. Circular Flow Diagram of a Market Economy. monetary flow. physical flow. Households. Firms. physical flow. monetary flow.

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Circular Flow of a Market Economy

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

  2. What does an economy look like?

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

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

  5. Circular Flow Diagram of a Market Economy Households pay firms for goods and services. monetary flow physical flow Firms supply households with goods and services. Households Firms physical flow monetary flow 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 Product market

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

  7. 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)>>>>>>

  8. Circular Flow Model Review (Worksheet) MARKETFLOW A. Taco Bell just hired you to assemble tacos ________ _____ 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? ________ _____

  9. 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: Flow: Resource (FOP) Household provides FOP (Labor)

  10. 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: Flow: Resource (FOP) Business Pay for FOP (Resources)

  11. 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: Flow: Product Household pays for G/S

  12. 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: Flow: Product Business Provide for G/S

  13. 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

  14. 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)

  15. 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

  16. 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

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