Activity 43 the factor market Determining the prices and quantities of inputs necessary for production.

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Presentation transcript:

Activity 43 the factor market Determining the prices and quantities of inputs necessary for production

HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer Purchases Productive Resources L. L. C. E. Goods & Services The product market The factor market

Consider the circular flow of the economy, and fill in the table by determining whether the activity takes place in the product or factor market what the role of the participant is in terms of supply and demand whether the price is a product price, a wage, interest or rent ActivityMarketRolePrice Cashier at work A business paying rent A firm hiring workers A student buying a hamburger A firm selling T-shirts

Consider the circular flow of the economy, and fill in the table by determining whether the activity takes place in the product or factor market what the role of the participant is in terms of supply and demand whether the price is a product price, a wage, interest or rent ActivityMarketRolePrice Cashier at workFactorSupplyWage A business paying rent FactorDemandRent A firm hiring workersFactorDemandWages A student buying a hamburger ProductDemandProduct Price A firm selling T-shirtsProductsupplyProduct Price

HOUSEHOLDS RESOURCE OWNERS Business firms Money payments Income payments Wages, Rent, Interest, Profits Consumer Purchases Productive Resources L. L. C. E. Goods & Services The product market The factor market

The circular flow also shows the interconnectedness of the two markets If input costs change in the factor market – price and output will be affected in the products market If price changes in the products market, because of a change in demand – the factor market will be affected

Consider the following headline; and determine which market (product or factor) is affected first, then determine how the other market is affected “A study announces increased cancer risk from drinking coffee” Primary Market Subsequent Market Affects supply or demand Affects supply or demand Influence on price (increase/decrease) Influence on price (increase/decrease)

Consider the following headline; and determine which market (product or factor) is affected first, then determine how the other market is affected “A study announces increased cancer risk from drinking coffee” Primary Market ProductSubsequent Market Factor Affects supply or demand DemandAffects supply or demand Demand Influence on price (increase/decrease) decreaseInfluence on price (increase/decrease) Decrease

Consider the following headline; and determine which market (product or factor) is affected first, then determine how the other market is affected “There is an increase in the number of people looking for work” Primary Market Subsequent Market Affects supply or demand Affects supply or demand Influence on price (increase/decrease) Influence on price (increase/decrease)

Consider the following headline; and determine which market (product or factor) is affected first, then determine how the other market is affected “There is an increase in the number of people looking for work” Primary Market FactorSubsequent Market Product Affects supply or demand SupplyAffects supply or demand Supply Influence on price (increase/decrease) DecreaseInfluence on price (increase/decrease) Decrease