--%>

Distinguish between the resource market and product market

Distinguish between the resource market and product market in the circular flow model.  In what way are businesses and households both sellers and buyers in this model?  What are the flows in the circular flow model?

E

Expert

Verified

The resource markets are where the owners of the resources (the households) sell their resources to the buyers of the resources (businesses).  In the merchandise markets, businesses sell the goods and services they have produced to the buyers of the goods and services, the households. Households (individuals) either own all economic resources directly or own them indirectly through their ownership of business corporations.  These households are willing to sell their resources to businesses because attractive prices draw them into specific resource markets.  Businesses buy resources because they are necessary for producing goods and services. The interaction of the buyers and sellers establishes the price of each resource.

In the product market, businesses are the sellers and householders are the buyers; their role in the market has been reversed.  Each group of economic units both buys and sells. One flow is the flow of real goods and services (including resource services) and the other flow is the flow of money (revenue, money income, production costs, consumption expenditures).

   Related Questions in Business Economics

  • Q : Fruit Question: Read the following

    Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

    Q : Market system automatically adjustment

    Concept of Adam Smith that the market system automatically adjusts as when guided through an “invisible hand” most intimately resembles: (1) flows of electricity across the microcircuits within computer chips. (2) homeosta

  • Q : Maximizes profits in a perfectly

    Which of the given is not true for a firm within perfect competition: w) Profit equivalents total revenue minus total cost. x) Price equivalents average revenue. y) Average revenue is greater than marginal revenue. z) Marginal revenue equivalents the

  • Q : Advantage and disadvantage of Sole

    Illustrate the advantage and disadvantage of Sole proprietorship?

  • Q : Explain the shapes of the

    Specify and explain the shapes of the marginal-benefit and marginal-cost curves and use these curves to determine the optimal allocation of resources to a particular product.  If current output is such that marginal cost exceeds marginal benefit, should more or l

  • Q : Comparative advantage in production I

    I have a problem in economics on Comparative advantage in production. Please help me in the following question. The oranges are grown in Florida and potatoes are grown in Maine mainly since: (i) orange-grower’s in Maine have not lobbied effectiv

  • Q : When productive resources are utilized

    While productive resources are utilized efficiently: (w) prices greatly exceed production costs for current outputs. (x) opportunity costs are at their minimums for all goods. (y) domestic production exceeds the value of foreign output. (z) the value

  • Q : What are the limitations of Circular

    What are the limitations of Circular Flow Model?

  • Q : Gains from Exchange- Practice and

    When a world famous concert pianist is as well the world's fastest short order cook, he would most likely gain the most financially through devoting: (i) Full time to frying burgers (ii) Full time to piano practice and concerts. (iii) Half-time cooking and half-time p

  • Q : Major type of expenditure at the state

    What is the most important source of revenue and the major type of expenditure at the state level?