Econ 104 1st Edition Lecture 5 Outline of Last Lecture I The Product Market II Law of demand III The Law of Supply IV Market Equilibrium Outline of Current Lecture II The Labor Market A factor Market III The basic circular flow a simple Macro Economy IV Real World Circular Flow V Measuring Total Production in the Real World Current Lecture I II The Labor Market A factor Market a Demand Curve represents firms i Firms demand labor services ii Demand is inversely related to the wage b Supply Curve Represents households i Households supply labor services ii Supply is positively related to the wage c Factors of production i Land ii Labor iii Capital 1 Physical 2 Human iv Entrepreneurship The basic circular flow a simple Macro Economy a Assumptions i Households own all the factors of production ii Firms use their income to buy factors of production iii Consumers spend all their income on goods and services b The Flow i Starting with Firms there is a circular flow 1 Firms 2 Payments These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute III IV 3 Factor market 4 Wages 5 Households 6 Demand of expenditures 7 Product market 8 Household expenditure budgets 9 Back to Firms ii Now if you start with households and go in the opposite direction 1 Households 2 Supplying factors 3 Factor market 4 Factors of production 5 Firms 6 Supply goods and services 7 Product market 8 Goods and services 9 Back to Households Real World Circular Flow a However in the real world the circular flow will include 1 Government 2 Financial sector 3 Foreign Sector b Leakages to the Spending Flow i Saving S ii Taxes T iii Imports M c Injections to the spending flow i Investment I ii Government G spending iii Exports X Measuring Total Production in the Real World a Gross Domestic Production The market value of all finished goods and services produced in a country over a period of time i Can be measured in 3 ways 1 Production The market value of final goods and services produced 2 Expenditure total expenditures on US goods and services 3 Income Income earned in producing goods and services
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