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Activity the factor market

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					       Activity 43
    the factor market
  Determining the prices and
quantities of inputs necessary for
            production
             The product market
                Money payments
                Consumer Purchases

           Goods & Services


HOUSEHOLDS                                     Business
RESOURCE                                       firms
OWNERS

             Productive Resources
                  L. L. C. E.

             Income payments
              Wages, Rent, Interest, Profits


             The factor market
Consider the circular flow of the economy, and fill in the table by
determining
       whether the activity takes place in the product or factor market
       what the role of the participant is in terms of supply and demand
       whether the price is a product price, a wage, interest or rent


      Activity            Market        Role              Price
Cashier at work

A business paying
rent
A firm hiring workers

A student buying a
hamburger
A firm selling T-shirts
Consider the circular flow of the economy, and fill in the table by
determining
       whether the activity takes place in the product or factor market
       what the role of the participant is in terms of supply and demand
       whether the price is a product price, a wage, interest or rent


      Activity            Market        Role              Price
Cashier at work            Factor       Supply             Wage

A business paying          Factor      Demand               Rent
rent
A firm hiring workers      Factor      Demand             Wages

A student buying a        Product      Demand             Product
hamburger                                                  Price
A firm selling T-shirts   Product       supply            Product
                                                           Price
             The product market
                Money payments
                Consumer Purchases

           Goods & Services


HOUSEHOLDS                                     Business
RESOURCE                                       firms
OWNERS

             Productive Resources
                  L. L. C. E.

             Income payments
              Wages, Rent, Interest, Profits


             The factor market
    The circular flow also shows the
interconnectedness of the two markets
• If input costs      • If price changes
  change in the         in the products
  factor market –       market, because
  price and output      of a change in
  will be affected in   demand – the
  the products          factor market will
  market                be affected
Consider the following headline; and determine which
   market (product or factor) is affected first, then
     determine how the other market is affected
 “A study announces increased cancer risk from
                  drinking coffee”

       Primary                Subsequent
       Market                   Market

   Affects supply            Affects supply
    or demand                 or demand

   Influence on price        Influence on price
 (increase/decrease)       (increase/decrease)
Consider the following headline; and determine which
   market (product or factor) is affected first, then
     determine how the other market is affected
 “A study announces increased cancer risk from
                  drinking coffee”

       Primary          Product       Subsequent           Factor
       Market                           Market

   Affects supply       Demand       Affects supply       Demand
    or demand                         or demand

   Influence on price   decrease     Influence on price   Decrease
 (increase/decrease)               (increase/decrease)
Consider the following headline; and determine which
   market (product or factor) is affected first, then
    determine how the other market is affected
 “There is an increase in the number of people
                  looking for work”

       Primary                Subsequent
       Market                   Market

   Affects supply            Affects supply
    or demand                 or demand

   Influence on price        Influence on price
 (increase/decrease)       (increase/decrease)
Consider the following headline; and determine which
   market (product or factor) is affected first, then
    determine how the other market is affected
 “There is an increase in the number of people
                  looking for work”

       Primary           Factor       Subsequent          Product
       Market                           Market

   Affects supply        Supply      Affects supply        Supply
    or demand                         or demand

   Influence on price   Decrease     Influence on price   Decrease
 (increase/decrease)               (increase/decrease)

				
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