Week 1 Discussion ECO2071.docx - Running head HOW THE...

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Running head: HOW THE ECONOMY WORKS 1 How the Economy Works Franchon Hurd South University ECO2071 – Principles of Micro-Economics Dr. Joseph Brandt July 7, 2018
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HOW THE ECONOMY WORKS 2 Scenario: Your supervisor has been asked many questions about how the economy works and why the idea of limited resources is such a major concern in today’s economy. As a result, she has asked you to prepare a report on the topics. The four divisions of the economy: household, firms, government and the foreign sector. The government is made up of income from the taxes paid by households and firms, the firms income is from the sale of goods and services, exports and borrowing from capital markets. Households include income from wages, interest, rent and profits from firms. Lastly, foreign sector income is from the firms in return for the good and services that are imported. Flow of Goods and Services Government Sector Firms Foreign Sector Households
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HOW THE ECONOMY WORKS 3 The households are the main area for the consumption of an economy and they perform in two ways; they supply and influence the services to the firms in the aspects of production like land, labor and capital. Households purchase goods and services produced by the firms directly from the markets. By that, they supply different factor services to the economy and they create demand for the final goods and services from the market. The
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