circular flow model
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the flow of the market - PowerPoint PPT PresentationTRANSCRIPT
Circular Flow of a Market Economy
Circular Flow of a Market Economy
Have Notebooks out
Warm up: Why are entrepreneurs needed in the economy?
Chapter 2 Section Main Menu
monetary flow
physical flow
monetary flow
physical flow
Circular Flow Diagram of a Market Economy
Households Firms
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
– Firms produce goods by taking inputs (FOP) and turning them into outputs (finished products)
Chapter 2 Section Main Menu
monetary flow
physical flow
monetary flow
physical flow
Circular Flow Diagram of a Market Economy
Households Firms
Product market
Factor (Resource) market
Households pay firms for goods and services.
Firms supply households with goods and services.
Households supply firms with land, labor, and capital.
Firms pay households for land, labor, and capital.
Circular Flow of a Market Economy
Factor Market = the exchange of Factors of Production (FOP) for money
Product Market = the exchange of finished products (G/S) for money
Chapter 2 Section Main Menu
monetary flow
physical flow
monetary flow
physical flow
Circular Flow Diagram of a Market Economy
Households Firms
Product marketHouseholds pay firms for goods and services.
Firms supply households with goods and services.
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
Chapter 2 Section Main Menu
monetary flow
physical flow
monetary flow
physical flow
Circular Flow Diagram of a Market Economy
Households Firms
Factor (Resource) Market
Households supply firms with land, labor, and capital.
Firms pay households for land, labor, and capital.
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
Chapter 2 Section Main Menu
Circular Flow Model Review (Worksheet)
Households Pay for G/S (Products) >>>>>>
<<<<<<Business Provide 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 ________ _____
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? ________ _____
MARKET FLOW
Chapter 2 Section Main Menu
Circular Flow Model Review (Worksheet)
Households Pay for G/S (Products) >>>>>>
<<<<<<Business Provide 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)
Chapter 2 Section Main Menu
Circular Flow Model Review (Worksheet)
Households Pay for G/S (Products) >>>>>>
<<<<<<Business Provide 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)
Chapter 2 Section Main Menu
Circular Flow Model Review (Worksheet)
Households Pay for G/S (Products) >>>>>>
<<<<<<Business Provide 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
Chapter 2 Section Main Menu
Circular Flow Model Review (Worksheet)
Households Pay for G/S (Products) >>>>>>
<<<<<<Business Provide 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
Chapter 2 Section Main Menu
Circular Flow Model Review (Worksheet)
Households Pay for G/S (Products) >>>>>>
<<<<<<Business Provide 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)
Households Pay for G/S (Products) >>>>>>
<<<<<<Business Provide 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)
Households Pay for G/S (Products) >>>>>>
<<<<<<Business Provide 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)
Households Pay for G/S (Products) >>>>>>
<<<<<<Business Provide G/S (Products)
<<<<<<<Business Pay for FOP (Resources)
Households Provide FOP (Resources)>>>>>>
In which market are businesses sellers?
Product