Economic products include goods and services since both are produced
Households (assumed to own factors of production) sell resources to businesses & businesses pay for resources they buy from households (a business pays a worker a day’s wage)Businesses sell goods & services to households & households pay for goods and services they buy from businesses (a consumer buys a sofa from a furniture company)Factor markets (firms make factor payments)- Entrepreneurs hire labor for wages & salaries, land is provided for rent, & money is loaned by the people or investedProduct markets - When individuals receive income they spend it on goods & services offered for saleProduct markets - Businesses receive money from selling goods & services to individualsFactor Markets-This money pays for land, labor, & capital bought in these markets, then use this to produce more goods/services
Traditional – security & stabilityCommand – Equity & securityMarket – Efficiency & Freedom
Both the gov’t and individuals play important roles with regard to production and consumption (who decides what varies from country to country)
One must add the gov’t to the center of this model for a mixed economy, gov’t receives taxes from individuals & businesses, provide products, buy factors, buy products, etc.