Circular Flow Lesson 2, Activity 5 1. Give three examples of resource owners. Answers will vary, answer can be anyone who has land, labor, capital or entrepreneurship.

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Presentation transcript:

Circular Flow Lesson 2, Activity 5 1. Give three examples of resource owners. Answers will vary, answer can be anyone who has land, labor, capital or entrepreneurship to sell in the factor market.

Circular Flow Lesson 2, Activity 5 2. Define a business firm. A business firm buys resources and, in turn, sells goods and services to resource owners.

Circular Flow Lesson 2, Activity 5 3. What is the product market? A market where finished goods and services are bought and sold.

Circular Flow Lesson 2, Activity 5 4. Give three examples of transaction you made this week in the product market. Any purchase of a good or service is correct

Circular Flow Lesson 2, Activity 5 5. What is a factor market? A market where the factors of production (land, labor, capital, entrepreneurship) are bought and sold.

Circular Flow Lesson 2, Activity 5 6. Give an example of a transaction you or your family made this month in a factor market. It probably would be wages for labor, although many other transactions are possible.

Circular Flow Lesson 2, Activity 5 7. How are businesses connected to factor and product markets? They buy in the factor market and sell in the product market.

Circular Flow Lesson 2, Activity 5 8. What determines the prices of land, labor, capital and entrepreneurship in a factor market? Supply and Demand

Circular Flow Lesson 2, Activity 5 9. Where do resource owners get the money to buy goods and services in the product market? From selling their resources in the factor market.

Circular Flow Lesson 2, Activity Where do business firms get the money to pay resource owners for the land, labor, capital and entrepreneurship in factor markets? From selling the goods and services they produce with the factors of production.

Circular Flow Lesson 2, Activity Why is it important to know that a market economy is characterized by interdependence? Interdependence is important because people specialize & trade their production in markets for their products they need. The circular flow of income shows the interdependence of the economy.