Download The Principles of Our Market Economy

The Principles of Our Market
Economy
Ch. 14
Sec. 1
Pp. 374-381
The Circular Flow of Economic Activity:
Expanding the Circular Flow
• Rent – payment
for the use of land
• Wages – payment
for the use of
labor
• Interest – payment
for the use of
capital.
Supply and Demand
• Buyers and sellers
exchange goods and
services through a
market
• Markets determine
price
• Producers compete
with each other to sell
goods and services to
consumers
Law of Demand
• Demand – the amount
of a product or service
that buyers are willing
and able to buy at
different prices
• At lower prices, people
demand more
• At higher prices, people
demand less
Law of Supply
• Supply – the amount of
a product that
producers are willing
and able to offer at
different prices
• At high prices, more
producers are willing
to supply the product
• At lower prices, less
producers are willing
to supply the product
Supply and Demand
• Price affects demand
and supply in opposite
ways
• Market Price – the
price at which buyers
and sellers agree to
trade
• Where demand and
supply intersect is the
market price
Questions
• What is the payment for the use of capital
called?
• a. interest
• b. profit
• c. supply
• d. allowance
Questions
• In a circular flow of economic activity,
producers need the following three resources
to create goods:
• a. technology, workers, money.
• b. rent, buildings, money.
• c. labor, land, capital.
• d. tools, interest, wants.
Questions
• What payment do producers exchange for the
use of labor?
• a. interest
• b. rent
• c. wages
• d. market price
Questions
• What is the amount of a product that buyers
are willing and able to buy at different prices?
• a. demand
• b. supply
• c. production
• d. sales
Questions
• What is the price at which buyers and sellers
agree to trade?
• a. a trade off
• b. market price
• c. cost of production
• d. profit