Outline the flow of goods and resources to and from economic decision makers: On
ID: 1200684 • Letter: O
Question
Outline the flow of goods and resources to and from economic decision makers:
One way to understand how the economy works is the circular flow model. This model demonstrates the flow of resources, goods, services, and income between households and business through the resource market and the market for goods and services. In a few paragraphs, please:
1) Identify the primary economic decision makers.
2) Describe how money and resources are exchanged in the resource market, indicating
3) Who gets the resource
4) Who gets the income
5) Describe how money, goods, and services are exchanged in the product and services market, indicating
6) Who receives the goods and services
7) Who gets the income
8) give a brief description of any other participants in an economy that are not represented in this simple model
Refer to the Circular Flow model resources provided below:
The Circular Flow Diagram; http://econperspectives.blogspot.com/2008/04/circular-flow-diagram.html
Circular Flow of Economic Activity: The Flow of Goods, Services & Resources
http://study.com/academy/lesson/circular-flow-of-economic-activity-the-flow-of-goods-services-resources.html
Resource Market: Definition & Overview; http://study.com/academy/lesson/resource-market-definition-lesson-quiz.html
In addition, it should be written well using correct grammar, and references need to be properly APA formatted
Explanation / Answer
In the circular flow of diagram, Households are the primary decision makers because they provide factors of production (labour, land and capital) to firms in addition to creating demand for the finished products produced by firms for the market economy.
In the resource market, Households provide resource to firms in the form of labour and land and gets income (wages, rent) from the firms for their services.
In the product market, households give money to businesses in exchange for goods and services. In this market, businesses usually are the suppliers and households usually are the demanders. The money that flows from households to business firms is consumption spending from the perspective of households and is revenue from the perspective of business firms. The products that flow from business firms to households are sales by the business firms and purchases by household consumers.
In the resource market or services market, businesses give money to households in exchange for economic resources used as factors of production. For example, when people work for a business, they are supplying their labor as a factor of production. In exchange for their labor, households are paid wages and salaries by businesses. In markets for economic resources, households usually are the suppliers and businesses usually are the demanders. The money that flows from business firms to households are expenditures from the perspective of business firms and incomes from the perspective of households. The labor, capital, and natural resources that flow from households to business firms are sources of income from the perspective of households and inputs from the perspective of businesses. Inputs are also called factors of production because they are used by businesses to produce goods and services.
The implicit participants of the economy include babies, old people, patients etc. who do not actively provide factors of production nor do they take part in any economic activity but consume the finished goods produced by the firms.
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