The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.

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Chapter1: Making Economics Decisions
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2. The circular-flow model
The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the
inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.
Firms
Markets for
Goods and Services
Markets for
Factors of Production
Based on this model, households earn income when
Event
Households
Suppose Becky earns $775 per week working as a software engineer for Casement. She uses $9 to have a drink at Barry's Bar, Barry's Bar pays Alex
$225 per week to work as a bartender. Alex uses $350 to purchase software from Casement.
Alex earns $225 per week working for Barry's Bar,
Identify whether each of the following events in this scenario occurs in the factor market or the product market.
Factor Market Product Market
Becky earns $775 per week working for Casement.
Alex spends $350 to purchase software from Casement.
purchase
O
O
O
in factor markets.
The cocktail Becky receives
The $225 per week Alex earns working for Barry's Bar
Becky's labor
The $350 Alex spends to purchase software from Casement
O
O
O
Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or outputs. Check all that
apply,
Transcribed Image Text:2. The circular-flow model The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Firms Markets for Goods and Services Markets for Factors of Production Based on this model, households earn income when Event Households Suppose Becky earns $775 per week working as a software engineer for Casement. She uses $9 to have a drink at Barry's Bar, Barry's Bar pays Alex $225 per week to work as a bartender. Alex uses $350 to purchase software from Casement. Alex earns $225 per week working for Barry's Bar, Identify whether each of the following events in this scenario occurs in the factor market or the product market. Factor Market Product Market Becky earns $775 per week working for Casement. Alex spends $350 to purchase software from Casement. purchase O O O in factor markets. The cocktail Becky receives The $225 per week Alex earns working for Barry's Bar Becky's labor The $350 Alex spends to purchase software from Casement O O O Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or outputs. Check all that apply,
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