13. The circular-flow model

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 when purchase in factor markets.

Suppose Maria earns $900 per week working as work as a flight attendant for Flyaway Airlines. She uses $8 to get her car washed at Spotless Car Wash. Spotless Car Wash pays Kevin $225 per week to wash cars. Kevin uses $125 to purchase air travel to Hawaii from Flyaway Airlines.

Identify whether each of the following events in this scenario occurs in the factor market or the product market.

Event

Factor Market

Product Market

Maria earns $900 per week working for Flyaway Airlines.

Kevin spends $125 to purchase air travel to Hawaii from Flyaway Airlines.

Maria spends $8 to get her car washed.

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

Maria's labor

The $225 per week Kevin earns working for Spotless Car Wash

The $125 Kevin spends to purchase air travel to Hawaii from Flyaway Airlines

The car wash Maria receives