The Principles of Our Market Economy

1
The Principles of Our Market Economy

• Ch. 14
• Sec. 1
• Pp. 374-381

2
The Circular Flow of Economic ActivityExpanding
the Circular Flow

• Rent payment for the use of land
• Wages payment for the use of labor
• Interest payment for the use of capital.

3
Supply and Demand

• Buyers and sellers exchange goods and services
  through a market
• Markets determine price
• Producers compete with each other to sell goods
  and services to consumers

4
Law of Demand

• Demand the amount of a product or service that
  buyers are willing and able to buy at different
  prices
• At lower prices, people demand more
• At higher prices, people demand less

5
Law of Supply

• Supply the amount of a product that producers
  are willing and able to offer at different prices
• At high prices, more producers are willing to
  supply the product
• At lower prices, less producers are willing to
  supply the product

6
Supply and Demand

• Price affects demand and supply in opposite ways
• Market Price the price at which buyers and
  sellers agree to trade
• Where demand and supply intersect is the market
  price

7
Questions

• What is the payment for the use of capital
  called?
• a. interest
• b. profit
• c. supply
• d. allowance

8
Questions

• In a circular flow of economic activity,
  producers need the following three resources to
  create goods
• a. technology, workers, money.
• b. rent, buildings, money.
• c. labor, land, capital.
• d. tools, interest, wants.

9
Questions

• What payment do producers exchange for the use of
  labor?
• a. interest
• b. rent
• c. wages
• d. market price

10
Questions

• What is the amount of a product that buyers are
  willing and able to buy at different prices?
• a. demand
• b. supply
• c. production
• d. sales

11
Questions

• What is the price at which buyers and sellers
  agree to trade?
• a. a trade off
• b. market price
• c. cost of production
• d. profit