Ch03Spring2011

1 macro 51 implications of circular implications flow

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Unformatted text preview: R IMPLICATIONS FLOW MODEL FLOW Product markets Product Households are buyers Business firms are sellers Resource markets Resource Households are sellers Business firms are buyers Upper loop vs. lower loop values Are identical Profits as the “balancing” Profits factor 6 HOW DOES A MARKET HOW ECONOMY ANSWER THE THREE QUESTIONS? THREE 1. What to produce? A. By $ votes cast by HH A. 2. How to produce? A. By least-cost combination A. of resources selected by business firms business 3. For whom is the output produced? For A. Who earns the income? A. 7 THE PRODUCT MARKET: THE DETERMINANTS OF DEMAND DETERMINANTS What is a demand schedule? What A hypothetical choice function hypothetical relating quantity demanded of X to P(x), all other things equal. What are the “determinants” of demand? demand? 1....
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This note was uploaded on 01/12/2012 for the course ECN 211 taught by Professor Kingston during the Spring '08 term at ASU.

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