1. Understanding the circular flow of income

2. 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

3. 1. Give three examples of resource owners 1. 2. 3.

4. 2. Define a business firm

5. 3. What is the product market?

6. 4. Give three examples of transactions you made this week in the product market: 1. 2. 3.

7. 5. What is the factor market?

8. 6. Give an example of a transaction you or your family made this week in the factor market: 1. 2.

9. 7. How are business firms connected to the factor and product markets?

10. 8. How are households connected to the factor and product markets?

11. 9. Where do resource owners get the money to buy goods and services in the product market?

12. 10. Where do business firms get the money to pay resource owners for their land, labor, capital and entrepreneurship in the factor market?

13. 11. Why is it important to know that a market economy is characterized by interdependence?

14. HOUSEHOLDS SELL, LOAN, LEASE, RENT THE FOUR FACTORS OF PRODUCTION TO BUSINESS FIRMS HOUSEHOLDS receive income from selling productive resources to firms, which allows them to purchase final goods and services

15. Business firms sell finished goods to households BUSINESS FIRMS earn income from selling products to households, which allows them to purchase productive resources

16. 12. What determines the prices of land, labor, capital and entrepreneurship in a factor market?