Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. The economy's income and expenditure The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green)

1. The economy's income and expenditure

The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.

Based on this model, households earn income whenf irms purchase labor and capital in markets for factors of production.

Suppose Dina earns $800 per week working as a roofer for Chloe's Construction. She uses $8 to install reflective stickers on her bike at Riley's Off-Road Repair. Riley's Off-Road Repair pays Charles $425 per week to fix bicycles. Charles uses $225 to purchase roofing supplies from Chloe's Construction.

Identify whether each of the following events in this scenario occurs in the market for factors of production or the market for goods and services.

Event Market for Factors of Production Market for Goods and Services
Dina spends $8 to install reflective stickers on her bike.
Charles spends $225 to purchase roofing supplies from Chloe's Construction.
Charles earns $425 per week working for Riley's Off-Road Repair.

Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or outputs.Check all that apply.

The reflective stickers Dina receives

The $225 Charles spends to purchase roofing supplies from Chloe's Construction

Dina's labor

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Economics Of The Environment Selected Readings

Authors: Robert Stavins

6th Edition

0393913406, 9780393913408

More Books

Students also viewed these Economics questions