WEEK 3 Flashcards
3 ECONOMIC DECISION MAKERS
Household
Government
Firm
economists assume that people try to
maximize their level of satisfaction, sense of well-being, happiness, and overall welfare.
Maximize Utility
Households use their limited resources–labor, capital, natural resources, and entrepreneurial ability– in an attempt to satisfy their unlimited wants.
Resource Suppliers
People who work for themselves rather than for employers; farmers, plumbers, and doctors are often self-employed.
Proprietors’ income
Cash or in-kind benefits given to
individuals by the government.
Transfer payment
Economic units formed by profit-
seeking entrepreneurs who employ resources to produce goods and services for sale.
Firms
PROFIT=
PROFIT = REVENUE - COST
a type of business organization in which an individual personally owns the business.
A sole proprietorship
is formed when two or more persons bind themselves to contribute money, property or industry to a common fund with the intention of dividing the profits and ownership among themselves.
A partnership
is owned by several people, called shareholders, and has a personality separate and distinct from them. owned by law. can either be stock or non-stock and are controlled by the Board of Directors or Trustees.
A corporation
is a group of people who cooperate by pooling their resources to buy and sell more efficiently than they could independently.
A cooperative, or “co-op” for short
Explain the Simple Circular-Flow Model for Households and Firms
Economic units are formed by profit-seeking entrepreneurs who employ resources to produce goods and services for sale.
Firms
Registration of sole proprietorships is with
Department of Trade and Industry (“DTI”).
Registration of partnerships is with
Securities and Exchange Commission (“SEC”).
