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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Identify each of the following as involving either demand or supply. Draw a circular flow diagram and label the flows A through F. (Some choices can be on both sides of the goods market.)

a. Households in the labor market

b. Firms in the goods market

c. Firms in the financial market

d. Households in the goods market

e. Firms in the labor market

f. Households in the financial market

To determine

To identify: The involvement in either demand or supply and draw a flow chart on the basis of identification from A to F.

Explanation

The identification is as follows:

  1. Households in the labor market are classified as supply, as they provide or supply the service of labor to the organizations.
  2. Firms in the goods market are to be classified as supply as they provide or supply food and goods related services to the market.
  3. Firms in the financial market are classified as demand as the firms demand money or finance to fund the operations of the businesses.
  4. Households in the goods market are to be classified as demand as the people demands food and goods and services so as to fulfill their daily needs.
  5. Firms in the labor market are classified as demands as they are in need of labor for production and other services for which they demand the labor...

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