Presentation on theme: " Product Market: This market consists of households/individuals/ consumers Resource/Factor Market: consists of businesses/firms who produce goods and."— Presentation transcript:
Product Market: This market consists of households/individuals/ consumers Resource/Factor Market: consists of businesses/firms who produce goods and services Government: Federal, state and local all interact with households and businesses Financial Sector: is sometimes shown. Banks and financial institutions regulate and supply money for both markets
HouseholdsBusinesses Resource/Factor Market Households sell factors of production to businesses; Land, Capital, and Labor. They are also entrepreneurs. Consumers sell resources to businesses. Businesses in turn- buy factors of production, pay wages, and earn profits
Product Market In the Product Market firms sell the products and services that produce to Households. Households buy those goods and services and spend money. Money spent on goods and services is called consumer expenditures.
Circular Flow diagrams will sometimes have the Product market on top and the Factor Market on bottom. Some will have Factor markets on the top and Product Market on the bottom. Don’t let that confuse you.