The circular flow model The following diagram presents a cir

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, households earn income when ___________a) firms or b) households purchase __________a)goods and services or b)resources in resource markets. Suppose Kate earns $600 per week working as work as a flight attendant for Flyaway Airlines. She uses $10 to have breakfast at Dinah\'s Diner. Dinah\'s Diner pays Hubert $250 per week to work as a short-order cook. Hubert uses $175 to purchase air travel to Hawaii from Flyaway Airlines. Identify whether each of the following events in this scenario occurs in the resource market or the product market.

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

Solution

1. 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, households earn income when firms purchase resources in resource markets. Suppose Kate earns $600 per week working as work as a flight attendant for Flyaway Airlines. She uses $10 to have breakfast at Dinah\'s Diner. Dinah\'s Diner pays Hubert $250 per week to work as a short-order cook. Hubert uses $175 to purchase air travel to Hawaii from Flyaway Airlines. Identify whether each of the following events in this scenario occurs in the resource market or the product market.

2.

3. The $175 to purchase air travel to Hawaii from Flyaway Airlines.

Event	Resource Market	Product Market
Hubert spents $175 to purchase air travel to Hawaii from Flyaway Airlines		Product Market
Kate spends $10 to have breakfast		Product Market
Hubert earns $250 per week working for Dinah\'s Diner	Resource Market