1. Vocabulary
Economic Interdependence- Businesses, households, and the gov’t all depend on each other in order for the economy to run smoothly.
Factor Market- Where the 4 factors of production are bought and sold.
Product Market- Where firms sell their goods and services and people buy them.

2. Warm Up?
How are you able to buy the things you want and need?

3. The Circular Flow of Economic Activity

4. The Circular Flow
Our economy is an enormous, constant cycle, with money, products, and energy flowing back and forth
Economists refer to this as the Circular Flow of Economic Activity
Economic Interdependence
Businesses, households, and the government depend on each other in order for the economy to run smoothly.

5. Households are where you find regular people who work and consume in our economy

6. Households
Firms are the businesses that produce, employ us, and purchase in our economy

7. Factor Market
The factor market is where the four factors of production are bought and sold.
Households
Firms

8. The Factor Market Factor Market
Four Factors
Factor Market
Households contribute their land, labor, skills, and capital to the factor marker.
Households
Firms

9. Those things are put to use in firms.
Four Factors
Factor Market
Four Factors
Those things are put to use in firms.
Households
Firms

10. The Product Market Factor Market Product Market
Four Factors
Factor Market
Four Factors
The product market is where firms sell their goods and services and people buy them.
Households
Firms
Product Market

11. Firms send those goods and services into the market.
Four Factors
Factor Market
Four Factors
Firms send those goods and services into the market.
Households
Firms
Product Market
Goods and Services To Be Sold

12. Purchased Goods and Services
Four Factors
Factor Market
Four Factors
The goods and services go back into households.
Households
Firms
Product Market
Purchased Goods and Services
Goods and Services To Be Sold

13. Purchased Goods and Services
Four Factors
Factor Market
Four Factors
Wages and Salaries
Meanwhile, firms put money back into the factor market in the form of wages and salaries.
Households
Firms
Product Market
Purchased Goods and Services
Goods and Services To Be Sold

14. Purchased Goods and Services
Four Factors
Factor Market
Four Factors
Income
Wages and Salaries
This money is the income households earn.
Households
Firms
Product Market
Purchased Goods and Services
Goods and Services To Be Sold

15. Purchased Goods and Services
Four Factors
Factor Market
Four Factors
Income
Wages and Salaries
Households spend this money on goods and services
Households
Firms
Expenditures
Product Market
Purchased Goods and Services
Goods and Services To Be Sold

16. Purchased Goods and Services
Four Factors
Factor Market
Four Factors
Income
Wages and Salaries
And businesses earn revenue.
Households
Firms
Expenditures
Revenue
Product Market
Purchased Goods and Services
Goods and Services To Be Sold

17. Purchased Goods and Services
Four Factors
Factor Market
Four Factors
Income
Wages and Salaries
Households
Firms
Expenditures
Revenue
Product Market
Purchased Goods and Services
Goods and Services To Be Sold

18. A Simplified Version RESOURCES WAGES AND SALARIES Households
Businesses
EXPENDITURES
FINISHED GOODS

19. THE ROLE OF GOVERNMENT
THE GOVERNMENT, MEANWHILE, PROVIDES LAW AND ORDER, STABILITY AND STRUCTURE TO ALLOW OUR ECONOMY TO PROSPER
FURTHERMORE, THE GOVERNMENT ALSO PROVIDES GOODS AND SERVICES THAT MIGHT NO OTHERWISE BE PROVIDED BY MARKET DEMANDS……..
NATIONAL DEFENSE
MAINTAINING NATIONAL AND PUBLIC PARKS AND MONUMENTS

20. REFLECTION What is economic interdependance?
What three elements depend on one another for economic interdependance?
What role do households play in the economy?
What role do firms play in the economy?
What role does the government play in the economy?
What type of economic system does the Island of Mocha have?

21. Closing?
What type of economic system does the Island of Mocha have?