Describe the circular flow of the economy by discussing the two markets where households and firms meet
What will be an ideal response?
Firms and households meet in two markets: the goods market and the factors market. In the goods markets, households buy the goods and services that firms sell. In this market, households give firms money in exchange for the goods and services. In the factors market, households sell the services of the factors of production to firms, which buy the services of these factors. In the factors market, firms pay households money in exchange for the productive resources. Hence households earn their incomes in the factors market and spend their incomes in the goods market. And firms earn their revenue in the goods market and pay their costs in the factors market.
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In the above figure, as output increases, the distance between curves B and C decreases because
A) total cost decreases as output increases. B) average fixed cost decreases as output increases. C) there are diminishing returns to average total cost. D) there are increasing marginal costs as output increases.
Free trade is better than protection for a small country
Indicate whether the statement is true or false