Question

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.

Based on this model, households earn income when ________________ purchase ___________ in factor markets.

Suppose Latasha earns $650 per week working as a programmer for PC Pros. She uses $9 to order a mojito cocktail at Little Havana. Little Havana pays Jake $350 per week to wait tables. Jake uses $250 to purchase software from PC Pros.

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 Firms Households Markets for Factors of Production Based on this model, households earn income when purchase in factor markets. Suppose Latasha earns $650 per week working as a programmer for PC Pros. She uses $9 to order a mojito cocktail at Little Havana. Little Havana pays Jake $350 per week to wait tables. Jake uses $250 to purchase software from PC Pros.

Answer 1

1) The households earn income when the firms purchase factors of production from factor market.

When the firms use factors of production like land , labour and capital from households than the firms will pay rent , wages and interest which is an income to households.

Answer: Firms , factors of production

2)

Event	Product market	Factor market	Reason
Latasha earns $650 per week working for PC pros		yes	Latasha is earning income by working where she is a also a factor of production here.
JAKE spends $250 to purchase software from PC pros	yes		Jake is spending money to buy the product which is produced in the market
Latasha spends $9 to order Jonjo cocktail	yes		Latasha is spending to money to consume a product which is produced in the product market.

3) All the above scenario will move from firms to households

The 350$ which Jake earns for working in Little Havana because here Jake is earning for his work from the firm as he is a factor of production.

The mojjoto Latasha receives also move from firm to households because she is paying money in the market and receiving the product which is produced by the crime.

The $250 which Jake spend to purchase software from PC pros is also moves firm to households as it is a production which is done by the firm is being taken by the household by paying the money in market.

Latasha labour is also comes under movement from firms to households because here Latasha is working for a firm which for inturn firm his paying her inthe factor market.