1. Economics Basic Decision-Making Units
Today let’s start with / get started with
Today I would like to start with the definition
Today we will be taking about …
So let’s start with the definitions of …
At the beginning of the lecture
In the beginning I would to show you …

2. The Basic Decision-Making Units
Firm
Households

3. The Circular Flow Model of Income and Output
It is a model that helps explain how a market economy works is a circular-flow diagram. A circular-flow diagram is a visual model of the economy that illustrates how households and businesses interact through markets for products and markets for resources.

4. Consumers
(Households)
Producers
(Businesses)

5. Consumers
(Households)
A market is
anything that
brings together
buyers and sellers
Producers
(Businesses)

6. The Circular Flow Model of Income and Output
Markets for resources (input markets)
Markets for products (output markets)

7. (land, labor, capital, entrepreneurs)
Consumers
(Households)
Resource Market
(land, labor, capital, entrepreneurs)
Product Market
(goods/services)
Producers
(Businesses)

8. (land, labor, capital, entrepreneurs) Make, sold goods and services
Buy goods, services
Consumers
(Households)
Spending money (GDP)
Resource Market
(land, labor, capital, entrepreneurs)
Product Market
(goods/services)
Revenue (GDP)
Producers
(Businesses)
Make, sold goods and services

9. Pay workers (wages, rent interest = GDP
Consumers
(Households)
Get a job
Get paid (income = GDP)
Resource Market
(land, labor, capital, entrepreneurs)
Product Market
(goods/services)
Pay workers (wages, rent interest = GDP
Producers
(Businesses)
Hire workers (input for production)

10. (land, labor, capital, entrepreneurs) Make, sold goods and cervices
Buy goods, services
Consumers
(Households)
Get a job
Resource Market
(land, labor, capital, entrepreneurs)
Product Market
(goods/services)
Stream / flow
Producers
(Businesses)
Hire workers
Make, sold goods and cervices

11. (land, labor, capital, entrepreneurs)
Consumers
(Households)
Get Paid
Spending money
Resource Market
(land, labor, capital, entrepreneurs)
Product Market
(goods/services)
Pay workers
In different category / different aspects (functions)
Revenue
Producers
(Businesses)

12. (land, labor, capital, entrepreneurs) Make, sold goods and services
Buy goods, services
Consumers
(Households)
Get a job
Get paid
Spending money
All parts of the circular flow diagram are dependent on all other parts!
Resource Market
(land, labor, capital, entrepreneurs)
Product Market
(goods/services)
Pay workers
And now I would like you a look at this diagram which shows flows in the whole economy.
This is a simplified verion of economy flows.
Revenue
Producers
(Businesses)
Hire workers
Make, sold goods and services

13. Others kinds of Decision-Making Units
Central bank, reserve bank, or monetary authority
Stock exchange
State
Farm
Bur we can’t forget about unit which is a farm. Our civilization in fact started with tribes which lived in the nature and gradually transformed in to farm.
This unit combines some functions of firm and same of a house hold.