Factor Market
What is a factor market?
A market where businesses obtain resources used to produce goods and services.
What is the product market?
The market where households buy goods and services from businesses.
What is a household in the circular flow model?
household is a person or group of people who consume goods and services and provide resources to businesses.
What is an input in production?
A resource used to produce a good or service, such as labor, materials, or machinery.
Why did the household invite the business to dinner?
Because it wanted to make ends meet!
Name two factors of production households can provide.
Labor and land Other factors include capital and entrepreneurship.
Give one example of a good and one example of a service.
Ex: a phone for a good and a haircut for a service.
What is a business and what does it provide to households?
A business produces and sells goods and services to households.
What is an outputin production?
The finished good or service produced by a business.
Why did the worker ask for a raise?
Because the cost of living was climbing faster than the paycheck!
A person works at a restaurant and earns $18 per hour.What factor of production are they providing, and what do they receive?
They provide labor and receive wages.
A customer buys a $30 shirt. Who receives the money and who receives the shirt?
The store receives the $30, and the customer receives the shirt.
When a family buys groceries from a supermarket, who is the buyer and who is the seller?
The family is the buyer (household),and the supermarket is the seller (business).
A bakery uses flour, ovens, and workers to make bread. Identify two inputs and one output.
Inputs: flour and workers.Output: bread.
Why did the store owner love economics?
Because every sale made good cents!
Which direction does labor flow and which direction do wages flow?
Labor flows from households to businesses Wages flow from businesses to households.
How is the product market different from the factor market?
The product market exchanges goods and services. The factor market exchanges resources used to produce them.
How do households andbusinesses depend oneach other?
Households provide resources and buy products. Businesses hire workers, pay income,and sell goods and services.
A car factory uses steel,machinery, workers, and electricity to produce cars. Identify three inputs and explain why cars are outputs.
(something along the lines of ) Inputs: steel, machinery, andworkers. Cars are outputs because they are the finished products made by the factory.
Why was the factory so productive?
It knew how to turn its inputs into outstanding outputs!
If a business hires more workers, how does this affect the factor market and money flow?
The business demands more labor and pays wages to additional workers. More money flows from the business to households.
If households spend more money at restaurants, how could this affect businessesand workers?
Restaurants may earn more revenue, increase production,and hire more workers. Workers may earn more income, which they can spend elsewhere.
What might happen ifhouseholds stopped buyinggoods and services?
Businesses would lose sales and revenue. They might reduce production, lay off workers, and pay less income to households.
A business runs out ofraw materials. How couldthis affect its production,sales, and workers?
Production may decrease because the business lacks inputs. Itmay sell fewer products, earnless revenue, and have less money available to pay workers.
Why did the circular flowmodel never get lost?
Because the money always came full circle!