EC 110 Lecture Notes - Lecture 2: Opportunity Cost, Supreme Headquarters Allied Powers Europe

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1/19/17 Econ
The Circular-Flow Diagram: A visual model of the economy, shows how
dollars flow through markets among households and firms
Two types of actors:
-Households
-Firms
Two Markets:
-The market for goods and services
-The market for ͞factors of production͟
Factors of Production: The resources the economy uses to produce goods &
services, including
-Labor
-Land
-Capital (buildings & machines used in production)
-Entrepreneurship (this is the idea)
Households:
-Own the factors of production, sell/rent them to firms for income
-Buy and consumer goods & services
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