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Lesson 6 Microeconomics.

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Presentation on theme: "Lesson 6 Microeconomics."— Presentation transcript:

1 Lesson 6 Microeconomics

2 Goods, Services, and Money
Microeconomics (micro: small) “zooming in” on producers and consumers ex: buying or selling of video games Macroeconomics: (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 markets 1. 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 landlords Labor: pay wages to workers Capital: 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 market households 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 market Firms/businesses can make more products for households to buy.

9 Circular Flow Model

10 Money Barter: 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 value standard of value: allows us to compare the economic value of different goods and services.

12 3. store of value store of value: something that keeps its value if it is stored rather than used.

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