economics

1. VocabularyVocabulary
►Economic Interdependence- Businesses,Economic Interdependence- Businesses,
households, and the gov’t all depend onhouseholds, and the gov’t all depend on
each other in order for the economy to runeach other in order for the economy to run
smoothly.smoothly.
►Factor Market- Where the 4 factors ofFactor Market- Where the 4 factors of
production are bought and sold.production are bought and sold.
►Product Market- Where firms sell theirProduct Market- Where firms sell their
goods and services and people buy them.goods and services and people buy them.

2. Warm Up?Warm Up?
►How are you able to buy the things youHow are you able to buy the things you
want and need?want and need?

3. The Circular Flow ofThe Circular Flow of
Economic ActivityEconomic Activity

4. The Circular FlowThe Circular Flow
►Our economy is an enormous, constantOur economy is an enormous, constant
cycle, with money, products, and energycycle, with money, products, and energy
flowing back and forthflowing back and forth
►Economists refer to this as theEconomists refer to this as the Circular FlowCircular Flow
of Economic Activityof Economic Activity
►Economic InterdependenceEconomic Interdependence
 Businesses, households, and the governmentBusinesses, households, and the government
depend on each other in order for the economydepend on each other in order for the economy
to run smoothly.to run smoothly.

5. Households
are where you find
regular people who
work and consume in
our economy

6. Households Firms
are the businesses that
produce, employ us,
and purchase in our
economy

7. Households Firms
Factor
Market
The factor market
is where the four
factors of
production are
bought and sold.

8. The Factor MarketThe Factor Market
Households Firms
Factor
Market
Households
contribute their
land, labor, skills,
and capital to the
factor marker.
Four Factors

9. Households Firms
Factor
Market
Those things are
put to use in firms.
Four Factors Four Factors

10. The Product MarketThe Product Market
Households Firms
Factor
Market
The product
market is where
firms sell their
goods and
services and
people buy them.
Product
Market
Four Factors Four Factors

11. Households Firms
Factor
Market
Firms send those
goods and
services into the
market.
Product
Market Goods and Services To Be Sold
Four Factors Four Factors

12. Households Firms
Factor
Market
Product
Market
The goods and
services go back
into households.
Purchased Goods and Services Goods and Services To Be Sold
Four Factors Four Factors

13. Households Firms
Factor
Market
Product
MarketPurchased Goods and Services Goods and Services To Be Sold
Four Factors Four Factors
Wages and Salaries
Meanwhile, firms
put money back
into the factor
market in the form
of wages and
salaries.

14. Households Firms
Factor
Market
Product
MarketPurchased Goods and Services Goods and Services To Be Sold
Four Factors Four Factors
Income Wages and Salaries
This money is the
income
households earn.

15. Households Firms
Factor
Market
Product
MarketPurchased Goods and Services Goods and Services To Be Sold
Four Factors Four Factors
Income Wages and Salaries
Expenditures
Households spend
this money on
goods and
services

16. Households Firms
Factor
Market
Product
MarketPurchased Goods and Services Goods and Services To Be Sold
Four Factors Four Factors
Income Wages and Salaries
Expenditures Revenue
And businesses
earn revenue.

17. Households Firms
Factor
Market
Product
MarketPurchased Goods and Services Goods and Services To Be Sold
Four Factors Four Factors
Income Wages and Salaries
Expenditures Revenue

18. A Simplified VersionA Simplified Version
RESOURCES
FINISHED GOODS
WAGES AND SALARIES
EXPENDITURES
BusinessesHouseholds