1. Bell Work Which of the following is a strength of a market economy?
Guaranteed equity
Guaranteed employment
Opportunity for profit
Lots of govt. regulation to ensure that no one has too little or too much

2. Circular Flow Diagram

3. Market: allows buyers and sellers to exchange items
Specialization: concentration of the productive efforts of individuals and firms on a limited number of activities---leads to efficient use of resources
Free Market Economy: based on voluntary exchanges---exchange money and products

4. The Circular Flow Diagram
Inner ring: represent the flow of resources and products
Outer ring: represents the flow of money

5. Household: Person or group of people living in the same residence: OWN the FOP and are CONSUMERS of goods and services
Firms: Businesses or organizations that USES resources to produce a product, which it sells. Transforms the “INPUTS” of the FOP into “OUTPUT” products

6. Factor Market: Firms purchase or rent land, hire workers and pay them wages and borrow money
Product Market: Household purchase products made by firms with the money that they received from firms

7. Draw the CFD 1. Draw and label the CFD with arrows and headings
Label the CFD that corresponds with each transaction
I purchase a coat from Walmart
I work for Walmart
I get paid for working at Walmart
Footlockers provides shoes to customers

8. Your turn:
List 6 transactions that would occur in the market and label them A through F
Draw the Circular Flow Diagram and label it
Put the 6 transactions onto the circular flow diagram