Circular Flow

Question 1

What are characteristics of a good?

Answer 1

• They are tangible have a physical presence
  -Involves a transfer of ownership
  -Consumer not involved in production
• Time lag between production and consumption
• Goods can be stockpiled

Question 2

What are characteristics of a service

Answer 2

-Intangable meaning they don’t have a physical presence
- The is no transfer of ownership
- Consumers participate in production
-Consumption and production happen at the same time

Question 3

What are the factors of production and what is their reward?

Answer 3

Land- rent
Capital- interest
Labour- wages
Enterprise- Profits

Question 4

What is the relationship between Firms and Households in the Factor Market?

Answer 4

Households- supply factors of production
Receive- wages, rent, interest and profit from firms

Firms- Buy factors of production and pay wages, interest, rent and profit to households

Question 5

What is the relationship between firms and households in the product market

Answer 5

Households pay for goods and services and receive goods and services
firms produce goods and services

Question 6

What is the relationship between Income, Expenditure and output

Answer 6

Income= Expenditure= Output

Question 7

What are some Injections into the circular flow model

Answer 7

Investments from firms
Government expenditure
Exports

Question 8

What are some leakages from the circular flow

Answer 8

Imports
Savings from firms and households
Taxes