1 The circular flow model The following diagram presents a c

1. The circular flow model

The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.

Based on this model, firms earn revenue when purchase in product markets.

Suppose Eleanor earns $600 per week working as a programmer for PC Pros. She uses $10 to have breakfast at Dinah\'s Diner. Dinah\'s Diner pays Darnell $300 per week to work as a short-order cook. Darnell uses $250 to purchase software from PC Pros.

Identify whether each of the following events in this scenario occurs in the resource market or the product market.

Event

Resource Market

Product Market

Which of the elements of this scenario represent a flow from a household to a firm? This could be a flow of dollars, inputs, or outputs. Check all that apply.

The $250 Darnell spends to purchase software from PC Pros

Eleanor\'s labor

The $300 per week Darnell earns working for Dinah\'s Diner

The breakfast Eleanor receives

Event	Resource Market	Product Market
Darnell spends $250 to purchase software from PC Pros.
Eleanor spends $10 to have breakfast.
Darnell earns $300 per week working for Dinah\'s Diner.

Markets for Goods and Services Firms Households Markets for Factors of Production

Solution

Product market,

Product market

Resource market

Eleanor\'s labour, the 250 Danielle spends to purchase software from pc pros