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Explorations in Economics

Explore relationships among households, firms, and markets in a market economy, including the government's role and its integration into the circular flow model. Learn about the functions of households and firms in purchasing goods and services, providing resources, and more. Practice drawing circular flow charts and answering questions to solidify your understanding.

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Explorations in Economics

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  1. Explorations in Economics Alan B. Krueger & David A. Anderson

  2. MODULE 6: The Modern Market Economy Circular Flow Model OBJECTIVES: To explain the relationship among households, firms, and markets in a market economy. To explain the government’s role in a market economy. To describe how the government fits into the circular flow model of the economy

  3. HOUSEHOLDS, FIRMS,AND MARKETS A household consists of an individual or a group of people who live together and share income, such as you and your family. 1. Households purchase goods and services from businesses. 2. Households provide land, labor, capital, and entrepreneurship (resources) from which goods and services are produced.

  4. HOUSEHOLDS, FIRMS,AND MARKETS A firm is a privately owned organization that produces goods or services and sells them to others.

  5. THE SIMPLE CIRCULAR FLOW

  6. THE SIMPLE CIRCULAR FLOW Product markets are where goods and services are exchanged for money. Factor markets are where resources are exchanged for money.

  7. GOVERNMENT’S ROLEIN A MARKET ECONOMY 1. A government can establish and enforce rules that improve market performance. 2. A government can provide important goods and services that private individuals tend not to purchase. 3. A government can help improve economic security, equity, and sustainability.

  8. GOVERNMENT IN THECIRCULAR FLOW

  9. Government in the Circular Flow

  10. Module 6 Review What is… A. Household? B. Firm? C. Circular flow diagram? D. Product market? E. Factor market?

  11. Circular Flow Practice

  12. Draw this chart on your paperTry to correctly label the Participants on the Chart in 1 minute…It doesn’t matter where you start, just that participants are in order relative to each other

  13. Check your answers

  14. Draw this chart on your paper Try the Chart again in a different order

  15. Check your answers

  16. List A-D on your paper Now complete the chart by including items bought and sold in the market D C A B

  17. Check your Answers Products Goods and Services Productive Resources Labor

  18. List A-L on your paperNow complete the chart by including items bought and sold in the market E F I L K J H G

  19. Check your Answers Products Goods and Services $$ $$ $$ Wages Productive Resources Labor

  20. You made it to the end of this lesson!! Can you…. Answer these Questions? • When do we engage in voluntary and involuntary exchange in the American economy? • How are households, business, and government interrelated through markets and the flow of money? • What role do I play in the economy? Define these Terms? Content Terms Market Capital Goods Productive Resources Product Market Factor/Resource Market Circular Flow Diagram Academic Terms Mechanism Interact Interdependent Facilitate Illustrate Sample Questions

  21. Can you answer this? The flow of goods and services to consumers is illustrated by • 1 to 2 • 2 to 3 • 3 to 4 • 4 to 1 4 3 1 2

  22. Can you answer this? The flow of goods and services to producers is illustrated by • 1 to 2 • 2 to 3 • 3 to 4 • 4 to 1 4 3 1 2

  23. Can you answer this? When the U.S. government purchases a submarine from a company, the government has made a major transaction in the • Factor Market • Public Market • Product Market • Foreign Exchange Market

  24. Circular Flow Practice

  25. Circular Flow Practice

  26. Circular Flow Practice

  27. Circular Flow Practice

  28. Circular Flow Practice

  29. Circular Flow Practice

  30. Circular Flow Practice

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