FIGURE 2-2 The Circular Flow Diagram Factors of production flow from households to businesses through the factor market, and products flow from businesses to households through the product market. Opposite these real flows are monetary flows. Households receive income from businesses (their costs) through the factor market, and businesses receive revenue from households (their expenditures) through the product market. Costs of production Factors of BUSINESSES Buy factors of production -Sell products Goods a and services Revenue FACTOR MARKET Households sell Firms buy PRODUCT MARKET Firms sell - Households buy Money Labour, land, preneurial Income wages, rents, Interest, profits) capital, entre. ability HOUSEHOLDS -Sell factors of prodtion Buy products Goods and services Consumption nditures expend a. Suppose that businesses buy a total of $100 billion of the four resources (labour, land, capital, and entrepreneurial ability) from households, If households receive $60 billion in wages, $10 billion in rent, and $20 billion in interest, how much are households paid for providing entrepreneurial ability? $ billion for entrepreneurial ability
FIGURE 2-2 The Circular Flow Diagram Factors of production flow from households to businesses through the factor market, and products flow from businesses to households through the product market. Opposite these real flows are monetary flows. Households receive income from businesses (their costs) through the factor market, and businesses receive revenue from households (their expenditures) through the product market. Costs of production Factors of BUSINESSES Buy factors of production -Sell products Goods a and services Revenue FACTOR MARKET Households sell Firms buy PRODUCT MARKET Firms sell - Households buy Money Labour, land, preneurial Income wages, rents, Interest, profits) capital, entre. ability HOUSEHOLDS -Sell factors of prodtion Buy products Goods and services Consumption nditures expend a. Suppose that businesses buy a total of $100 billion of the four resources (labour, land, capital, and entrepreneurial ability) from households, If households receive $60 billion in wages, $10 billion in rent, and $20 billion in interest, how much are households paid for providing entrepreneurial ability? $ billion for entrepreneurial ability
Chapter1: Making Economics Decisions
Section: Chapter Questions
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