Question

2. The circular-flow model The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs Markets for Goods and Services Households Firms Markets for Factors of Production firms Based on this model, firms earn revenue when purchase factors n product markets. Suppose Hilary earns $825 per week working as a corporate attorney for Rowan and Martin Associates. She uses $9 to buy a box of aspirin at Pillmart Pharmacy. Pillmart Pharmacy pays Edison $350 per week to work the cash register. Edison uses $325 to purchase legal service from Rowan and Martin Associates.

Answer 1

Answers to blank 1: Households

Answers to blank 2: Goods & services

Statement 1: Factor market

Statement 2: Product market

Statement 3: Product market

Ans:

• Hilary's labor
• The $325 Edison spends to purchase legal service from Rowan and Martin Associates.