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Unformatted text preview: fl smaneook x 6 9 O 9 El httpsufwwwmhlearnsmartcom/flow/smarthookhtmI': _, j? {E L L? Economics - The Micro Economy Today - Schiller, Gebhardl.14e. Supply and Demand GHAPIER 3: SUPPLY .Illll IIEIAAID 47 I’IEIIIIE 3.1 The m Hour Busines firms supply goods and services to product markets (point A) and purchase Vaclnrs of production in factor markets (B). Individual consumers supply factors of aroduction such as their own labor (0} and purchase final goods and services [0). Federal. state. and local govemmznls acquire resources in factor markets (E) and pmvide services to both consumers and business (F). lntemational participants also take part by supplying imports. purchasing exports (G). and buying and selling {actors at production (H). A:Goodeandservioes 3. Factors of production « <— 0 Type here to search Q: 47 o$~= File Home lnzert [iron letorj,‘ an ‘ E-D 3E: l—J—‘Cahbfl . 11 V ~/ Tooorcnm) Ll :ToDoTag . Eg 7 fix Important :cemz} |~ rig FindTags . Pa“ ‘9' I Q '95 K2 ' '9' ' A. ' 5‘ X swig ? Qustion‘CtrHS) j Em" . . Page clipboard Baslclext Styles lags Ernal[ A [I] Sequoya @ Tallahassee Com... - ; mic-kmfi - T' Searsnicmto )3 v explain most market activity. a o s . . CHAPT SpeCializatIon and Exchange We are driver. to ouy and sell goods and services In the market by two Simple rests. CHAN 1. Most of us are incapable of producing everything we want to consume. 1. Even i; we could produce all our own goods and services, it would still make sense to specialize, producing only one product andtmding it for other desired goods and services. Dur economic interactions with others are thus necessrlided by two constraints: 1. Eur absolute inaoility as individuals to produce all the things we need or desire. 2. The iimited amount at time, energy, and resources we have for producing those things we could make for ourselves. Together these constraints lead us to specialize and interact Most of the interactions that result take place in the market. Intematinna! Trade, Tw nations will end up consuming more products than they could it they had to produce everything themselves. That's why global markets are so vital to economic prosperity. E) The Two Markets The easiest my to keep track orall this activity is to distinguish two basic market. 1. In factol markets. factors of production are exchanged. Market participants buy or sell land, lahor, or capital that can he used in the production process. 2. In Product market's... consumers go to the grocery store to buy desired goods and servims that is, to buy products. In this context, consumers again interact with business firms, thistime purchasing goods and servioes those firms have produced. {Foreigners also participate in the product market by supplying goods and services (imports) to the United States and buying some of our output (exports). .. 0: ...
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