--%>

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 : Government Pegged Currencies Question:

    Question: If a government pegs the value of its currency to another currency, the government must stand ready to i. _________________________ the "hard" currency to defend the pegged value of its own currency. ii.

  • Q : Who define economics as a subset of

    Economists who viewed economics like a subset of jurisprudence combined: (1) John Stuart Mill. (2) Alfred Marshall. (3) Karl Marx. (4) William Stanley Jevons. (5) Adam Smith. Hey friends please give your opinion fo

  • Q : Major implication of invisible hand of

    The major implication of Adam Smith’s conception of an “invisible hand” was such that: (w) pursuit of individual self interest must be controlled. (x) most people lose sight of what’s good for society. (y) most

  • Q : What is the opportunity cost of your

    Suppose you arrive at a store expecting to pay $100 for an item, but learn that a store two miles away is charging $50 for it.  Would you drive there and buy it?  How does your decision benefit you?  What is the opportunity cost of your decision?  Now suppose you arrive at a s

  • Q : Technological advances in producing

    When given resources can now produce additional goods than was previously probable, then there have been a: (1) Stock market boom. (2) Competitive spurt which shrinks entrepreneurial gain. (3) Concavity reversal in the production possibilities frontier. (4) Bigger rel

  • Q : What are the scientific method that

    What are the scientific method that Economists use to establish theories, laws, and principles?

  • Q : The Federal corporate income tax Use

    Use the circular flow model to confirm this assertion for a 2% reduction in the Federal corporate income tax.

  • Q : When Economic efficiency is present

    Economic efficiency is present while the: (w) economic system is a pure socialist system. (x) resources obtainable are slightly wasted. (y) value of output is maximized, specified restricted resources. (z) utilization of resources is minimized. <

  • Q : External costs and external benefits

    Explain the impact of external costs and external benefits on resource allocation

  • Q : Economics as a science Economics as a

    Economics as a science:We no longer ask the problem whether economics is an art or a science. Science is a systematized body of knowledge. Merely as physics and chemistry are sciences, econo