Econ Chapter 3 - Chapter 3 Firm an organization that...

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Chapter 3 Firm – an organization that transforms resources (inputs) into products (outputs). Firms are the primary producing units in a market economy. Households – The consuming units in an economy. Product of output markets – The markets in which goods and services are exchanged. Input or factor markets – The markets in which the resources used to produce products are exchanged. Labor market – The input/factor market in which household supply work for wages to firms that demand labor. Capital market – the input/factor market in which household supply their savings, for interest or for claims to future profits, to firms that demand funds to buy capital goods. Land market – The input/factor market in which households supply land or other real property in exchange for rent. Factors of production – The inputs into the production process. Land, labor, and capital are the three key factors of production. Quantity demand – The amount (number of units) of a product that a household would buy in a given period if it could buy all it wanted at the current market price. A household’s decision about what quantity of a particular output, or product, to demand depends on: 1. Price of the product 2. Income available 3. Amount of accumulated wealth 4. Prices of other products 5. Tastes and preferences 6. Expectations about the future income, wealth, and prices Demand schedule
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