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Vocabulary ► Economic Interdependence- Businesses, households, and the gov’t all depend on each other in order for the economy to run smoothly. ► Factor.

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Presentation on theme: "Vocabulary ► Economic Interdependence- Businesses, households, and the gov’t all depend on each other in order for the economy to run smoothly. ► Factor."— Presentation transcript:

1 Vocabulary ► Economic Interdependence- Businesses, households, and the gov’t all depend on each other in order for the economy to run smoothly. ► Factor Market- Where the 4 factors of production are bought and sold. ► Product Market- Where firms sell their goods and services and people buy them.

2 Warm Up? ► How are you able to buy the things you want and need?

3 The Circular Flow of Economic Activity

4 The Circular Flow ► Our economy is an enormous, constant cycle, with money, products, and energy flowing back and forth ► Economists refer to this as the Circular Flow of Economic Activity ► Economic Interdependence  Businesses, households, and the government depend on each other in order for the economy to run smoothly.

5 Households are where you find regular people who work and consume in our economy

6 Households Firms are the businesses that produce, employ us, and purchase in our economy

7 Households Firms Factor Market The factor market is where the four factors of production are bought and sold.

8 The Factor Market Households Firms Factor Market Households contribute their land, labor, skills, and capital to the factor marker. Four Factors

9 Households Firms Factor Market Those things are put to use in firms. Four Factors

10 The Product Market Households Firms Factor Market The product market is where firms sell their goods and services and people buy them. Product Market Four Factors

11 Households Firms Factor Market Firms send those goods and services into the market. Product Market Goods and Services To Be Sold Four Factors

12 Households Firms Factor Market Product Market The goods and services go back into households. Purchased Goods and ServicesGoods and Services To Be Sold Four Factors

13 Households Firms Factor Market Product Market Purchased Goods and ServicesGoods and Services To Be Sold Four Factors Wages and Salaries Meanwhile, firms put money back into the factor market in the form of wages and salaries.

14 Households Firms Factor Market Product Market Purchased Goods and ServicesGoods and Services To Be Sold Four Factors IncomeWages and Salaries This money is the income households earn.

15 Households Firms Factor Market Product Market Purchased Goods and ServicesGoods and Services To Be Sold Four Factors IncomeWages and Salaries Expenditures Households spend this money on goods and services

16 Households Firms Factor Market Product Market Purchased Goods and ServicesGoods and Services To Be Sold Four Factors IncomeWages and Salaries ExpendituresRevenue And businesses earn revenue.

17 Households Firms Factor Market Product Market Purchased Goods and ServicesGoods and Services To Be Sold Four Factors IncomeWages and Salaries ExpendituresRevenue

18 A Simplified Version RESOURCES FINISHED GOODS WAGES AND SALARIES EXPENDITURES BusinessesHouseholds

19 THE ROLE OF GOVERNMENT ► THE GOVERNMENT, MEANWHILE, PROVIDES LAW AND ORDER, STABILITY AND STRUCTURE TO ALLOW OUR ECONOMY TO PROSPER ► FURTHERMORE, THE GOVERNMENT ALSO PROVIDES GOODS AND SERVICES THAT MIGHT NO OTHERWISE BE PROVIDED BY MARKET DEMANDS…….. ► NATIONAL DEFENSE ► MAINTAINING NATIONAL AND PUBLIC PARKS AND MONUMENTS

20 REFLECTION ► What is economic interdependance? ► What three elements depend on one another for economic interdependance? ► What role do households play in the economy? ► What role do firms play in the economy? ► What role does the government play in the economy? ► What type of economic system does the Island of Mocha have?

21 Closing?


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