2 Goods, Services, and Money Microeconomics (micro: small) “zooming in” on producers and consumersex: buying or selling of video gamesMacroeconomics: (macro: large) “zooming out” study of behavior and decision making of entire economies.ex: unemployment rate of the country
3 Circular Flow Model: shows how individuals and businesses exchange money, resources, and products in the market place.
4 Two basic units of Microeconomics: Producers: firms/businesses that produce goods and services. (use resources to make products)
5 2. Consumers: people who purchase goods - Households: groups of people (families) that live together and purchase goods to be shared by everyone in the group. ex: shared products: furniture, appliances, and cooking equipment.
6 Two types of markets1. Factor market (resource):a. includes all the exchanges that firms/businesses must make in order to produce things.b. firms/businesses must pay for all the resources (factors of production)
7 Continue Factor Market Land: pay rent to landlordsLabor: pay wages to workersCapital: pay interest to people who lend them money to invest(businesses use these resources to provide goods and services for the product market)
8 2. product markethouseholds buy things that firms/businesses have made.Incomes of households flow back to businesses as profits (profit: financial gain made in a transaction)Firms/businesses use profits to buy more resources in the factor marketFirms/businesses can make more products for households to buy.
10 MoneyBarter: trade or exchange of one set of goods or services for another.Why do we use money in America?medium of exchange: anything that is used to determine value during the exchange of goods and services.
11 2. standard of valuestandard of value: allows us to compare the economic value of different goods and services.
12 3. store of valuestore of value: something that keeps its value if it is stored rather than used.