NEW214Y1 Lecture Notes - Lecture 7: Environmental Degradation, Noble Eightfold Path, Buddhist Economics

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12 Oct 2017

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As scientists, economists try to explain the world using models with appropriate assumptions. They also play the role of policy advisors to prescribe how the world should be. Economic models are highly simplified representations of a more complicated reality, making it easier to understand and to make predictions. An example of economic model is the circular-flow diagram, which evolves two (cid:862)players(cid:863) (households & firms) and two (cid:862)markets(cid:863) (the market for goods and services and the market for factors of production) Households own the factors of production, sell/rent them (labor) to firms for income buy and consume goods and services more invisible, Firms buy/hire factors of production, use them to produce goods and services sell goods and services. Supply and demand is one of the most fundamental concepts of economics. Supply represents how much a market can offer. Demand represents how much of a product of services is desired by buyers.

Related Questions

In the circular flow diagram, which of the following is true in the product market?

A. Households sell goods and services to business firms

B. Households sell resources to business firms

C. Business firms sell resources to households

D. Business firms sell goods and services to households

E. Households buy resources from business firms

sangriafrog597

14. The factor market can best be described as, where __________. a. Families buy goods and services. b. Firms buy goods and services. c. Firms buy the services of labor, land and capital. d. The government sells goods and services.

15.Investment in the US is financed through __________. a. Private savings, surpluses in the government budget, and borrowing from the rest of the world. b. Private savings, deficits in the government budget, and borrowing from the rest of the world. c. Private lending, deficits in the government budget, and lending to the rest of the world. d. Private savings and borrowing from the rest of the world.

16. In the Circular Flow Model, goods and services produced by business firms are sold on __________. a.. The goods market b. In the factor market c. In the labor market d. In the financial market

17. If we import more than we export from the rest of the world, we __________. a.. We must borrow an equal amount from the rest of the world. b. We can lend an equal amount to the rest of the world. c. We have a surplus. d. We are helping to finance the investment of the rest of the world.

18. The Circular Flow Model shows that the family sector earns its income __________. a. Selling factors of production. b. Buying factors of production. c. Selling goods and services. d. Selling financial assets

A. Based on the model, firms earn revenue when ______________(firms, households) purchase ___________(goods and services, labor and capital) in markets for goods and services.

B. Suppose Kate earns $800 per week working as a doctor for the Medical Clinic. She uses $9 to order a mojito cocktail at Little Havana. Little Havana pays Hubert $300 per week to wait tables. Hubert uses $175 to purchase medical services from the Medical Clinic.

a. Identify whether each of the following events in the scenario occurs in the market for factors of production or the market for goods and services.

Event	The market for Factors of Production	The market for goods and services
Kate spends $9 to order a mojito cocktail.
Hubert spends $175 to purchase medical services for the Medical Clinic.
Hubert earns $300 per week working for Little Havana.

b. Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or output.

Kate's labor, The Mojito Kate receives, The $175Hubert's spend to purchase Medical services from the Medical Clinic.

c. The actual economy is more complicated than the one illustrated in the previous circular-flow diagram of a simple economy. True/False.

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NEW214Y1 Lecture Notes - Lecture 7: Environmental Degradation, Noble Eightfold Path, Buddhist Economics

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